Energy Stocks With Fat Dividend Yields
Energy Stocks With Fat Dividend Yields
One of the key developments for energy investors in recent years has been a move among oil and gas production companies to return cash to shareholders.
It used to be that petroleum producers would focus on plowing cash back into producing more, even if there were diminishing returns as added production brought prices down.
Investors got tired of that, especially given the cyclical nature of the oil and gas industry and the economic downturns that led to hardship for producers. Now, many exploration and production companies are more focused on returning free cash flow to shareholders in the form of stock buyback and dividends.
Now, under the administration of President Donald Trump, there is a renewed focus on domestic oil and gas production as well as exports of natural gas in a liquid form, potentially boosting earnings and dividends of petroleum producers.
"I'm optimistic about the energy sector broadly for many reasons, including the fact that America is putting an increasing focus on domestic energy production," says David Beahm, a precious metals and financial market expert who is CEO of coin and metals firm Blanchard and Co.
Here's a look at top seven energy companies paying dividends:
Energy Stock
Devon Energy Corp. (ticker: DVN)
Cheniere Energy Inc. (LNG)
Williams Cos. Inc. (WMB)
National Fuel Gas Co. (NFG)
BP PLC (BP)
NextEra Energy Inc. (NEE)
Alliant Energy Corp. (LNT)
It used to be that petroleum producers would focus on plowing cash back into producing more, even if there were diminishing returns as added production brought prices down.
Investors got tired of that, especially given the cyclical nature of the oil and gas industry and the economic downturns that led to hardship for producers. Now, many exploration and production companies are more focused on returning free cash flow to shareholders in the form of stock buyback and dividends.
Now, under the administration of President Donald Trump, there is a renewed focus on domestic oil and gas production as well as exports of natural gas in a liquid form, potentially boosting earnings and dividends of petroleum producers.
"I'm optimistic about the energy sector broadly for many reasons, including the fact that America is putting an increasing focus on domestic energy production," says David Beahm, a precious metals and financial market expert who is CEO of coin and metals firm Blanchard and Co.
Here's a look at top seven energy companies paying dividends:
Energy Stock
Devon Energy Corp. (ticker: DVN)
Cheniere Energy Inc. (LNG)
Williams Cos. Inc. (WMB)
National Fuel Gas Co. (NFG)
BP PLC (BP)
NextEra Energy Inc. (NEE)
Alliant Energy Corp. (LNT)
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Re: Energy Stocks With Fat Dividend Yields
Devon Energy Corp. (DVN)
This U.S.-focused onshore oil and gas exploration and production company is the energy dividend pick for Beahm, who praises its recent dividend increase, strong earnings and free cash flow.
"Devon Energy's fixed-plus-variable dividend model means that shareholders' returns are calibrated to the commodity cycle," Beahm says. "In other words, shareholder returns increase when energy prices and profits are high, but the base dividend still has a floor when the market goes down."
The company is yielding 2.6%.
This U.S.-focused onshore oil and gas exploration and production company is the energy dividend pick for Beahm, who praises its recent dividend increase, strong earnings and free cash flow.
"Devon Energy's fixed-plus-variable dividend model means that shareholders' returns are calibrated to the commodity cycle," Beahm says. "In other words, shareholder returns increase when energy prices and profits are high, but the base dividend still has a floor when the market goes down."
The company is yielding 2.6%.
Re: Energy Stocks With Fat Dividend Yields
Cheniere Energy Inc. (LNG)
Another key development in the industry is the globalization of the natural gas market. U.S. producers are sitting on a huge quantity of natural gas in the ground that is relatively easy to extract.
That means prices for the commodity in the U.S. are much cheaper than they are in Asia and Europe, creating a huge export opportunity. That not only benefits companies that build and operate plants that chill natural gas into liquid form and load it onto specialized ships for transport around the world. It also benefits exploration and production companies that now have another place to sell their natural gas.
"Cheniere is the leading exporter of liquefied natural gas, an area with substantial growth ahead given the U.S. has abundant, cheap natural gas," says Simon Lack, portfolio manager of the Catalyst Energy Infrastructure Fund (MLXAX). "They are very good at execution, generally negotiate long-term contracts with buyers and have growing cash flow."
Cheniere's dividend yield is relatively low, but the stock may be worth checking out as the company itself seems to have a bright future. The company is yielding 0.9%.
Another key development in the industry is the globalization of the natural gas market. U.S. producers are sitting on a huge quantity of natural gas in the ground that is relatively easy to extract.
That means prices for the commodity in the U.S. are much cheaper than they are in Asia and Europe, creating a huge export opportunity. That not only benefits companies that build and operate plants that chill natural gas into liquid form and load it onto specialized ships for transport around the world. It also benefits exploration and production companies that now have another place to sell their natural gas.
"Cheniere is the leading exporter of liquefied natural gas, an area with substantial growth ahead given the U.S. has abundant, cheap natural gas," says Simon Lack, portfolio manager of the Catalyst Energy Infrastructure Fund (MLXAX). "They are very good at execution, generally negotiate long-term contracts with buyers and have growing cash flow."
Cheniere's dividend yield is relatively low, but the stock may be worth checking out as the company itself seems to have a bright future. The company is yielding 0.9%.
Re: Energy Stocks With Fat Dividend Yields
Williams Cos. Inc. (WMB)
Beyond the export market, domestic natural gas also has another source of new demand – data centers that power artificial intelligence (AI).
AI requires much more computing power than before. That, coupled with new demands on the grid from electric vehicles and other forms of electrification, means demand for electricity is forecast to grow strongly in the coming years after a period of relative stagnation.
Solar and wind farms won't be able to provide all of the needed increase in electricity, and nuclear power plants take a long time to permit and develop, meaning natural gas will be in demand for some time.
"Williams Cos. is one of the biggest natural gas pipeline companies in the U.S.," Lack says. "They are well positioned to meet the growing demand from data centers for additional natural gas to provide power."
The company is yielding 3.4%.
Beyond the export market, domestic natural gas also has another source of new demand – data centers that power artificial intelligence (AI).
AI requires much more computing power than before. That, coupled with new demands on the grid from electric vehicles and other forms of electrification, means demand for electricity is forecast to grow strongly in the coming years after a period of relative stagnation.
Solar and wind farms won't be able to provide all of the needed increase in electricity, and nuclear power plants take a long time to permit and develop, meaning natural gas will be in demand for some time.
"Williams Cos. is one of the biggest natural gas pipeline companies in the U.S.," Lack says. "They are well positioned to meet the growing demand from data centers for additional natural gas to provide power."
The company is yielding 3.4%.
Re: Energy Stocks With Fat Dividend Yields
National Fuel Gas Co. (NFG)
Here's another natural gas-focused company. It is the favorite fossil fuel play of Timothy Winter, portfolio manager of the Gabelli Utilities Fund (GABUX).
The company is diversified between exploration and production, gathering, pipeline and storage, and utility business segments. Late last year, it got approval from the New York Public Service Commission to boost its base delivery rates and charges for gas service, marking a win for the company with its first increase to base delivery rates in New York since 2017.
The "outlook for natural gas is strong given growing LNG export demand and electric power demand," Winter says.
The company is yielding 2.6%.
Here's another natural gas-focused company. It is the favorite fossil fuel play of Timothy Winter, portfolio manager of the Gabelli Utilities Fund (GABUX).
The company is diversified between exploration and production, gathering, pipeline and storage, and utility business segments. Late last year, it got approval from the New York Public Service Commission to boost its base delivery rates and charges for gas service, marking a win for the company with its first increase to base delivery rates in New York since 2017.
The "outlook for natural gas is strong given growing LNG export demand and electric power demand," Winter says.
The company is yielding 2.6%.
Re: Energy Stocks With Fat Dividend Yields
BP PLC (BP)
This stock is an oil and gas supermajor, meaning it is one of the biggest oil and gas companies in the world. It is vertically integrated, meaning it explores for and extracts oil and gas, refines the commodities into petroleum products, and distributes and markets those products. It's also involved in energy trading and power generation.
That size, business mix and geographic diversification lend the company stability, but it also means BP isn't likely to grow as fast as a smaller exploration and production company could.
"BP in my view has been poorly managed the last decade, placing too much reliance on clean energy and forgetting that the core business of oil and gas is not going to go anyway anytime soon," says Vince Stanzione, CEO at First Information, a publisher of educational materials related to financial spread betting and derivatives trading.
But that is changing, as the company has announced cuts to renewable energy investment and a boost to spending on oil and gas. Meanwhile, activist investor Elliott Management has taken a roughly 5% stake.
"When the CEO of Elliott, Paul Singer, starts demanding changes, you are fairly sure they will happen," Stanzione says.
He adds that BP could spin off or sell its retail gasoline forecourt business to bring in cash that could be used to raise the dividend and buy back stock. A forecourt is the part of a gas station where the fuel pumps are located, as opposed to the convenience store section that sells snacks and other items.
"For what is normally a boring energy stock, BP is looking primed to make big moves," Stanzione says.
The company is yielding 5.7%.
This stock is an oil and gas supermajor, meaning it is one of the biggest oil and gas companies in the world. It is vertically integrated, meaning it explores for and extracts oil and gas, refines the commodities into petroleum products, and distributes and markets those products. It's also involved in energy trading and power generation.
That size, business mix and geographic diversification lend the company stability, but it also means BP isn't likely to grow as fast as a smaller exploration and production company could.
"BP in my view has been poorly managed the last decade, placing too much reliance on clean energy and forgetting that the core business of oil and gas is not going to go anyway anytime soon," says Vince Stanzione, CEO at First Information, a publisher of educational materials related to financial spread betting and derivatives trading.
But that is changing, as the company has announced cuts to renewable energy investment and a boost to spending on oil and gas. Meanwhile, activist investor Elliott Management has taken a roughly 5% stake.
"When the CEO of Elliott, Paul Singer, starts demanding changes, you are fairly sure they will happen," Stanzione says.
He adds that BP could spin off or sell its retail gasoline forecourt business to bring in cash that could be used to raise the dividend and buy back stock. A forecourt is the part of a gas station where the fuel pumps are located, as opposed to the convenience store section that sells snacks and other items.
"For what is normally a boring energy stock, BP is looking primed to make big moves," Stanzione says.
The company is yielding 5.7%.
Re: Energy Stocks With Fat Dividend Yields
NextEra Energy Inc. (NEE)
Utilities can form a defensive counterpoint to cyclical oil and gas stocks. They tend to be more staid because homes and businesses need electricity year-round, regardless of what the economy is doing.
This renewables powerhouse is a leader in solar and wind electricity generation. The company is also involved with green hydrogen, battery storage and nuclear. Natural gas is also a large component of its generation mix.
NextEra is Winter's favorite renewable energy idea.
"Renewable stocks have underperformed since the election, but (we) believe renewable tax credits will remain and expect a lot of solar and batteries to (be) added over next several years," he says.
The company is yielding 3.2%.
Utilities can form a defensive counterpoint to cyclical oil and gas stocks. They tend to be more staid because homes and businesses need electricity year-round, regardless of what the economy is doing.
This renewables powerhouse is a leader in solar and wind electricity generation. The company is also involved with green hydrogen, battery storage and nuclear. Natural gas is also a large component of its generation mix.
NextEra is Winter's favorite renewable energy idea.
"Renewable stocks have underperformed since the election, but (we) believe renewable tax credits will remain and expect a lot of solar and batteries to (be) added over next several years," he says.
The company is yielding 3.2%.
Re: Energy Stocks With Fat Dividend Yields
Alliant Energy Corp. (LNT)
Winter also likes this utility that provides service to about 1 million electric customers and around 430,000 natural gas customers in the Midwest.
"They have large data centers coming on line," Winter says. "We like lower-risk, stronger, growing dividend stories."
The company is expected to provide power to two data centers in Cedar Rapids, Iowa. One will be operated by digital infrastructure company QTS and the other by Alphabet Inc.'s (GOOG, GOOGL) Google.
Alliant Energy is yielding 3.2%.
Winter also likes this utility that provides service to about 1 million electric customers and around 430,000 natural gas customers in the Midwest.
"They have large data centers coming on line," Winter says. "We like lower-risk, stronger, growing dividend stories."
The company is expected to provide power to two data centers in Cedar Rapids, Iowa. One will be operated by digital infrastructure company QTS and the other by Alphabet Inc.'s (GOOG, GOOGL) Google.
Alliant Energy is yielding 3.2%.