Continuing on this weekend's theme of investing for income ...
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TODAY'S FEATURED STOCK STORY For energy investors, share price gains on the back of higher oil prices aren't the only way to make money. Many energy companies also provide a dividend.
In recent years, these companies have been prioritizing returning money from strong oil prices to shareholders in the form of dividends or share buybacks rather than exploration, in response to shareholder concerns about overproduction.
After a dip, oil prices hit 10-month highs on Sept. 19 amid supply cuts from Saudi Arabia and Russia. Prices have eased a bit since, but companies in the sector are up about 18% over the past year, edging out the S&P 500's 16% gain.
"I am bullish on oil prices and the sector at large," says Daniel Bustamante, managing partner and chief investment officer of Bustamante Capital. "Supplies are very tight … and without investment for infrastructure for production that causes an issue."
"Traditional energy sources such as oil and gas will continue to be in demand for years to come," says Craig Giventer, managing director of portfolio strategies at GYL Financial Synergies. "With that said, renewable sources will continue to gain share of energy demand for years to come as well."
With that in mind, here's a look at seven of the best energy companies paying dividends. While they aren't the highest dividends on the market right now, the companies themselves appear to be stable for the coming years. Dividends are for the trailing 12 months and data is as of the Sept. 19 market close:
Chevron Corp. (ticker: CVX). Chevron is one of the biggest oil companies in the world, with exploration and production operations, midstream transportation assets and downstream manufacturing and retail businesses.
Imitation is the sincerest form of flattery, and investors can do much worse than to imitate Warren Buffett," says Robert Johnson, finance professor at Creighton University.
The oil and gas supermajor has a trailing dividend yield of 3.6% and has increased its dividend for 37 years. The company's size and stability mean it can weather the booms and busts inherent to the oil and gas industry and keep on paying its dividends.
"Chevron's management has done an excellent job of developing sizable energy resource plays at scale, being efficient from both an operational and capital deployment standpoint, and in protecting the company's balance sheet in both the ups and downs of the energy commodity cycle," says Giventer.
"The company generates significant levels of free cash flow and has a long history of returning free cash flow to shareholders via both a consistent, growing dividend and share repurchases," Giventer adds.
Trailing-12-month (TTM) dividend yield: 3.6%
Devon Energy Corp. (DVN). Giventer also likes this U.S.-focused shale producer.
"Devon's management team is highly regarded for its hyper-focus on operating its assets at attractive returns, returning free cash flow to shareholders through a fixed-plus-variable dividend framework, as well as using excess free cash flow for repurchases and acquisitions," he says.
Because of the highly cyclical nature of the exploration and production industry, which is tied to the price of oil and gas, Giventer says Devon's dividend policy of a fixed payout ratio and additional variable dividends is both conservative and wise.
It means the company isn't locked into a large fixed dividend, which investors may come to expect regardless of market factors, while maintaining its ability to boost the variable dividend based on cash flow and earnings.
TTM dividend yield: 7%
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ENERGY DIVIDEND STOCKDIVIDEND YIELD (TTM) AS OF SEPT. 19
Chevron Corp. (ticker: CVX)3.6% Devon Energy Corp. (DVN)7% TotalEnergies SE (TTE)4.7% Shell PLC (SHEL)3.5% EOG Resources Inc. (EOG)2.5% BP PLC (BP)4.1% Consol Energy Inc. (CEIX) 3.3%
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