Energy stocks have seen a lot of volatility over the last two years as the supply of oil increased and the price of oil plummeted. In 2014, the price of a barrel of Crude Oil WTI was over $100. By the beginning of 2015, the price was under $50 per barrel. The final bottom in price occurred earlier this year when crude hit $25 a barrel. The chart below illustrates the downfall of crude oil prices since 2012. While the price has rebounded since the February lows, it has not come close to rebounding to its 2014 price high.
On November 30th, 2016 the Organization of Petroleum Exporting Countries (OPEC) agreed to cut crude oil production by 1.2 million barrels a day. Currently, production is at a record high, at 33.6 million barrels per day. This will be the first cut in production since 2008, but there is still expected to be a significant surplus in oil supply. This production cut will likely drive up the price of Crude Oil WTI and make many energy companies more profitable.
The news sent many energy stocks soaring.The Energy Select Sector SPDR ETF (NYSE: XLE) jumped over 5% following the news (compared to year-to-date performance of +10%).This bump comes after many of these stocks jumped as part of the “Trump Rally” following the election, and has many energy investors excited about current performance and how the new production may impact oil prices going forward. WIth large tax cuts and decreased regulation on the way in 2017, many of the energy companies listed below should profit from increased economic growth.
The stocks below are the energy stocks that I maintain on our Top 100 Dividend Stocks list. My favorites include Occidental Petroleum, Schlumberger, Total SA ADR, and Valero. While some investors have been spooked by the energy sector in the last two years, there are many intriguing stocks with high dividends & excellent dividend growth prospects now that oil has crossed back above $50 a barrel.
Occidental Petroleum Corporation (NYSE: OXY) is my most favored energy company. The stock jumped nearly 6% following the OPEC news. The stock is down about 5% in 2016, but is up 5% since February. The company recently acquired acreage in the Permian Basin for about $2 billion in a deal with private sellers.The deal will allow OXY to expand operations in Texas and grow its revenue stream.
The stock currently pays a quarterly dividend of $0.76 and has a well covered dividend yield of approximately 4.25%. The company has been steadily raising its dividend for investors and offers a great yield. The firm is one of the most defensive energy stocks within the industry. The stock has been one of the least volatile during a tumultuous 2016. The company will go ex-dividend next week on December 7 and will pay its quarterly dividend on January 13.
Schlumberger Limited (NYSE: SLB) climbed over 5% following the OPEC production reports. The stock is up nearly 9% year-to-date, and has seen several analyst upgrades over the last two months. In addition, Schlumberger, which is the world’s largest driller, recently signed a deal with Iran to research in Iranian fields. While this deal could be impacted by the Trump administration, it is expected that this deal will be positive for the company and could drive shares upward. The company is the worldwide leader in the oil service industry and ranks just below Occidental.
Schlumberger currently has a dividend yield over 2% and pays a quarterly dividend of $0.50.The company has held its dividend steady, maintaining its current dividend since 2015, and increasing it prior. SLB will go ex-dividend on December 5 and will pay its next dividend on January 13.
Total SA (ADR) (NYSE: TOT) increased about 1.60% after the OPEC announcement to cut production. The stock is down about 3% in 2016 and has seen a fair amount of volatility this year. Like Schlumberger, Total SA also made a deal with Iran, which will likely benefit the company’s bottom line in 2017.
The France-based ADR offers a healthy dividend yield of about 5.6%, which is a great income opportunity for investors. Since TOT is an ADR, its dividend payouts vary each quarter. Its last payout, in October, paid investors $0.6698 per share. We expect its next dividend announcement to be in the middle of December.
Valero Energy Corporation (NYSE: VLO) was the only energy stock on my Top 100 Dividend Stocks list to decline after the OPEC announcement, falling by over 3% during market hours on November 30. As a refining company, it is less impacted by a rise in the price of oil and a cut in supply. A cut in supply could result in less refining for the firm. In 2016, the stock has dropped over 15%.
Despite its sluggish performance, the stock can be a great opportunity for dividend investors. Valero currently offers a dividend yield of nearly 4% and pays a quarterly dividend of $0.60. The stock will pay its next dividend payout on December 15. We expect its next dividend announcement to be at the end of January. Valero has been increasing its dividend every year since 2011.
Exxon Mobil Corporation (NYSE: XOM) shares increased modestly following the OPEC news, at 1.6%. The stock is up about 7% in 2016 (and up 12% excluding the January correction). The company also recently announced its plan to merge with InterOil after winning a bidding war. However, this deal has been delayed by regulators. But with the new Trump administration, it is now more likely to go through.
For dividend investors, Exxon Mobil as a lot to offer. The company has a dividend yield over 3.4% and currently pays a dividend of $0.75 each quarter. Exxon Mobil has been continuously boosting its dividend each year since 1983. Like Occidental, it is also one of the more “safety” plays within the industry. It maintains the lowest beta (measure of volatility) in the industry. It will pay its next dividend on December 9 and will likely announce its following dividend in early February.
Hess Corp. (NYSE: HES) soared nearly 14% during market hours following the OPEC production news. Despite the significant increase, the stock is still down in 2016 due to sluggish performance in the beginning of the year. In addition to the positive news, some analysts expect the company to have exceptional performance during the Trump administration.
The company currently pays a $0.25 quarterly dividend and has a dividend yield of about 1.80%. While it has not consecutively raised dividends, it has been paying them for over twenty years. I expect Hess to declare its next dividend in the beginning of December and make a payout by the end of the year.
Marathon Petroleum Corp (NYSE: MPC) was up over 2% after the announcement from OPEC, but is down nearly 20% in 2016. The petroleum refining company saw a significant decline during the correction in the beginning of 2016, but has been able to rebound in recent months. In the last three months, the stock is up more than 10%.
Although the stock performance has seen volatility , the company offers a dividend yield over 3%. Currently, Marathon Petroleum pays a quarterly dividend of $0.36 and will pay its next dividend on December 6. We expect the company to declare its next dividend in early February. MPC has been boosting its dividend consecutively since 2011.
Chevron Corporation (NYSE: CVX) rose over 2% following the OPEC news. In addition, the stock is up over 23% in 2016, which outperforms the sector by about 10%. During the oil price decline, Chevron has done a great job slashing expenses, eliminating over $10 billion in expenditures this year. It is also a well diversified firm with both upstream and downstream operations.
Chevron has continued to be a great choice for dividend investors. Despite plummeting oil prices, the company has finally raised its dividend, marking its first increase since 2014. The company currently pays a quarterly dividend of $1.08 and has a dividend yield of approximately 3.90%. CVX will pay its next dividend on December 12. We expect the company to declare its next dividend in February.
Timothy J. McIntosh
Mr. McIntosh is the author of the three investment books including the newly released “The Snowball Effect, “The Sector Strategist”, and also “The Bear Market Survival Guide”. He has been featured in such notable publications as the Wall Street Journal, New York Times, USA Today, Investment Advisor, Fortune, and The St. Petersburg Times. He holds a Bachelor of Science Degree in Economics from Florida State University, a Master of Business Administration (M.B.A) from the University of Sarasota, and a Master of Public Health Degree (M.P.H) from the University of South Florida. He also serves as the Chief Investment Officer of SIPCO-PVG. He served as a Professor of Finance at Eckerd College from 1998 to 2008. He and his wife and two boys reside in Tampa, Florida.
He writes a daily dividend blog @ www.thedividendmanager.com
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