Income potential is still huge in oil and gas stocks.
The energy sector as a whole has been one of the worst-performing parts of the stock market in 2020. In fact, you’d be hard-pressed to name even a dozen stocks in the industry that aren’t currently flat or down on the year as of this writing. However, long-term income investors know that energy investments are not just a tool for capital gains. While some companies are indeed volatile and closely linked to oil or gas prices, a bunch of stocks in this sector offer steady revenue regardless of the ups and downs of the global economy. These picks can sometimes offer dividends significantly above that of the typical stock. If you’re looking for energy picks with this kind of generous income potential, here are nine companies in the sector that currently yield at least 5%.
Cheniere Energy Partners (ticker: CQP)
Cheniere Energy Partners is the parent company behind various natural gas facilities, mainly near the Sabine Pass terminal in Louisiana. There were fears that recent hurricanes that made landfall in the area would disrupt energy assets in the region; however, Cheniere seems to have avoided any serious setbacks and is back to business as usual. Shares retested their 2020 highs around the $40 mark in August prior to the threat of storms — and if shares recover back to those levels now that the threat has passed, they could easily set highs for the year. The company has also increased its dividend payment each quarter for the past few years.
Current yield: 7.5%
Chevron Corp. (CVX)
Big Oil giant Chevron isn’t quite as big as it once was — but at around $150 billion in market capitalization and roughly $140 billion in annual revenue, it’s still a force to be reckoned with. CVX has already predicted a return to healthy profitability in 2021 after the disruptions of this year start to abate and cost-cutting measures take hold. Specifically, Chevron announced as much as 15% of its global workforce would be eliminated this year, the biggest layoff among major oil stocks in the wake of the pandemic and related oil price volatility. Looking forward, CVX is right-sized for the future, and its dividends look to be well-financed even at their current generous levels.
Current yield: 6.4%
China Petroleum & Chemical Corp. (SNP)
Colloquially known as Sinopec, SNP is a state-run oil giant headquartered in Beijing and valued at nearly $70 billion. If you think that traditional Big Oil stocks have staying power thanks to their massive operations and deep pockets, then you should really find Sinopec appealing because it has those features and more. After all, even in the extremely unlikely event that operations and profitability are threatened by an external event, the Chinese government would naturally backstop this company. There is admittedly a bit of opacity around a stock like this, and SNP is certainly not wholly risk-free — given its close connection to oil prices — but the chance of a bankruptcy or the complete elimination of its dividend seems all but impossible given the politics of state ownership in this stock.
Current yield: 9.9%
Delek Logistics Partners (DKL)
A “steady Eddie” stock in the midstream energy space, Delek Logistics owns and operates assets such as pipelines and storage facilities for crude oil and refined petroleum products. Before the rapid crash of oil prices in the spring, DKL was a boring and range-bound stock that hovered around $30 come rain or shine for the broader stock market over the last five years. In reaction to the sell-off in early 2020, DKL briefly crashed below $10 a share. Now, the stock is right back where it was after a steady climb from its March lows — and the dividend is actually higher at 90 cents per share in August versus 85 cents per share paid at the same time in 2019.
Current yield: 11.5%
Unlike a few of the highest-yielding stocks in the sector that are structured as master limited partnerships, or MLPs, Enbridge is an energy stock that follows a more traditional corporate structure. Fundamentally, however, ENB is similar to the other pipeline stocks in that it owns a broad array of vital and hard-to-replace assets across the energy supply chain. The $60 billion organization touches a host of subsectors in energy, from refineries to transportation to even electric power transmission. It also offers the scale and diversification to provide consistent revenue trends — and thus consistent dividend payouts to its shareholders.
Current yield: 7.8%
Kinder Morgan (KMI)
Houston-based Kinder Morgan is one of the preeminent energy infrastructure companies in North America. It operates natural gas pipelines, petroleum product distribution assets, terminals and storage assets. All told, KMI owns and operates approximately 83,000 miles of pipelines and 147 storage terminals — so chances are any big energy company has used or is currently using Kinder Morgan to bring its products to market. This is not as exciting as oil field exploration in which a small company can strike it rich with a big find, but it certainly is much more reliable. That steady flow of cash from customers should be appealing to income-oriented investors, too, as KMI’s dividend yield stands at nearly quadruple that of the average stock in the S&P 500 at present.
Current yield: 7.9%
At a mere $2 billion in market cap, gasoline retailer Sunoco is smaller than many other names on this list but perhaps the most recognizable one thanks to a network of more than 5,000 locations across the U.S. to fill up your tank. Obviously, the pandemic has limited the driving of many folks who are now working remotely or forgoing travel, but the good news is that SUN stock quickly stabilized from its March lows around $11 a share and is back at about $25. That’s still admittedly down from its 2019 highs, but it’s a good sign that operations did not suffer any long-term damage. Even better is a forecast of more than $3 in earnings per share next fiscal year, which some analysts believe could cover every penny of its generous yield and still leave profits left over.
Current yield: 13.1%
Total SE (TOT)
French oil major Total may not be as familiar to U.S investors as domestic Big Oil names, but a market cap of more than $100 billion and extensive worldwide operations aren’t to be overlooked. Unfortunately, even those expansive operations have taken a big hit in recent years — as evidenced by TOT stock falling from more than $60 a share in 2018 to around $40 today. That’s partially due to market dynamics but also because TOT is treading lightly in the age of climate change concerns. The company recently decided to abandon exploration offshore in Brazil because of the proximity to sensitive Amazon rainforest areas. The fact that the stock continues to pay a steady and generous dividend amid all this restructuring is a good sign that its long-term income potential may be bright, even if share prices have rolled back a bit in recent years.
Current yield: 8%
The Williams Companies (WMB)
Yet another midstream company, Williams is a $25 billion pipeline player that owns and operates facilities across North America. All told, WMB oversees 30,000 miles of pipelines, 28 processing facilities and a staggering 23 million barrels of natural gas storage capacity. With a rich history, The Williams Companies traces its roots back more than 100 years and has paid a common stock dividend every quarter since 1974. That’s proof that even if energy prices go up and down, long-term investors can depend on WMB to offer a steady stream of income in any market — most recently with a quarterly payout of 40 cents per share.
Current yield: 8%
Nine energy stocks with 5%-plus dividends:
— Cheniere Energy Partners (CQP)
— Chevron Corp. (CVX)
— China Petroleum & Chemical Corp. (SNP)
— Delek Logistics Partners (DKL)
— Enbridge (ENB)
— Kinder Morgan (KMI)
— Sunoco (SUN)
— Total SE (TOT)
— The Williams Companies (WMB)
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