Both sales and earnings are critical factors in the success of a company. Companies with quarterly EPS or revenue growth of more than 1,000% were excluded as outliers. Supply and demand dynamics affect prices of oil and thus oil shares.
It will allocate the rest of its cash to expand its operations, reduce emissions, and maintain a top-tier balance sheet. That focus on growing its cash flow and returning it to shareholders is why ConocoPhillips is my favorite oil stock to own for the coming years. Income investing veterans may be thinking, “DVN is only paying dividends because oil and gas prices are soaring.” But that’s not the case.
Are oil and gas companies a good investment?
Not to mention, recent declines in the stock have brought the share price to a more than reasonable valuation. Given this point, it’s not surprising that the company is targeting an annual capital expenditure of $13 billion to $15 billion through 2027. At the same time, Chevron is diversifying its portfolio toward low-carbon business. Oil and gas stocks can produce significant capital gains from share price appreciation and attractive dividend income.
Then, in mid-2022, the company increased that authorization to common stock repurchases of $4 billion. Based in London, England, BP is one of the energy “supermajors” with trailing annual revenue of more than $200 billion, 60,000 employees, and a market capitalization of $102 billion. Buffett no doubt likes that OXY stock nearly doubled in 2022, making it one of the best-performing stocks in the S&P 500. He also certainly likes Occidental Petroleum’s low P/E ratio of 5.3.
For one thing, midstream operators represent one of the more stable components within the energy supply chain. As an example, pure exploration firms live or die by discoveries, which is a volatile way of making a living. However, midstream firms like Hess typically feature long-term, fee-based contracts. The company launched an industry-first, fixed-plus-variable dividend framework in 2021.
Founded in 1985, EOG Resources has developed into one of the largest publicly-traded exploration and production (E&P) companies based on market capitalization available to investors. Presumably, its many untapped resources will be a source of continuing production. As of the end of 2022, the company reports it has total estimated net proved reserves of 4.2 billion barrels of oil equivalent, suggesting that EOG has plenty of opportunities to extract oil from the ground.
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So far this year, the Dow Jones U.S. Oil & Gas Total Stock Market Index is up almost 35%. Integrated oil companies have some aspects of production, services and refining all in-house. This can mean that their risks are spread out more broadly than companies that specialize in one aspect of the oil industry. When you see prices rising or falling at the gas pump, you might wonder how those market shifts are playing out with oil stocks on Wall Street. The world’s largest oil-exporting nations include members of OPEC (Organization of the Petroleum Exporting Countries), a cartel that works to coordinate members’ oil policies. It can withhold supply to push prices higher or increase its output to drive them lower.
- Bloomberg analysts looked at how the price of energy commodities trended over the last 20 years and how an index of energy-related investments performed over the same period.
- The company’s midstream business consists of 22,000 miles of pipeline mostly located in the U.S.
- Since higher prices mean more revenue for oil companies, Wall Street has been piling up on oil stocks.
With an average price target of $130.42, Wall Street gives COP implied price upside of about 22% in the next 12 months or so. Add in the dividend yield, and the implied total return comes to about 25%. To that end, we screened the S&P 500’s oil & gas sector for oil stocks with the highest consensus Buy recommendations, based on S&P Global Market Intelligence data. Meanwhile, I am collecting an industry-leading 6% dividend yield while this diversified oil company prudently adjusts with the world around it. It’s a bit of a punt option but one that lets me sleep well at night in a sector that is prone to volatility in the best of times and today is facing something of an existential crisis.
Chevron (CVX)
Meanwhile, it boosted its dividend by another 5% earlier this year and has given investors 11 raises in 10 years. More dividend growth seems likely over the next few years, making its 3.8%-yielding payout attractive for income-seeking investors. Although the favorable gas market has propelled CHK to a gain of more than 45% for the year-to-date through April 15, analysts say it’s still undervalued.
The company has also repurchased 16.5 million shares in the year to date. With these positives, I expect CPG stock to be a value creator. For example, when the Covid-19 pandemic caused https://bigbostrade.com/ millions of offices and businesses to close, it had a devastating effect on the oil and gas sector. In fact, at one point, the futures contract for a barrel of oil turned negative.
- Investors who bid up shares in such firms were simply following the money as rising oil prices filled the exploration and production companies’ coffers.
- The Federal Reserve is making moves to curb high inflation rates, and many financial experts concur that an economic downturn could be on the horizon.
- To get a true picture of the discount the stock trades at, just look at its P/E and P/S ratios, which stand at around 5 and 1.4, respectively.
- Devon’s oil output reached an all-time high of 323,000 BPD during the second quarter, up 8% year-over-year, fueled by acquisitions and newly drilled wells.
- For one thing, midstream operators represent one of the more stable components within the energy supply chain.
However, they’ve since given back most of those gains on concerns that rising interest rates to combat inflation will drive the economy into a recession next year, denting oil demand. Despite all that volatility, most oil stocks have surged this year as investors realize that fossil fuels remain vital to fueling the economy. Therefore, market participants need to appreciate the risk/return profile of oil stocks before buying into the share price of an oil company.
Pioneer Natural Resources Company (PXD)
Instead of the usual Form 1099 you get from stocks to report your dividends at tax time, you get a complicated K-1 package instead. Our final stock, free forex signals Shell, comes from the other side of the Atlantic. The oil and gas supermajor Shell explores, is also en route to become a low-carbon producer.
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But a surprise production cut on the part of OPEC and its allies might be just the catalyst the best oil stocks need to return to their market-beating ways. TotalEnergies isn’t alone; peers Royal Dutch Shell (RDS.B) and BP (BP -1.32%) are also using their oil profits to fund clean energy investments. However, of this trio, only TotalEnergies is going down this road without a dividend cut. And it isn’t giving up on oil and natural gas, with a goal of growing both its energy business (with a shift toward cleaner-burning natural gas) and its “electrons” business at the same time.
The energy sector has torched the market in 2022, but the pros say that even after breathtaking gains, these oil and gas stock picks have at least 20% more upside. Nonetheless, I should remind readers that high returns typically mean higher degrees of volatility and risk, at least in the short-run. Therefore, readers interested in growth shares should research their chosen stocks and buy them for the long-haul. Oil industry bulls can also be skeptical of a recent acquisition an oil company might have made. Such transactions typically mean taking on debt that creates vulnerabilities, especially in times of macroeconomic stress for the oil industry.
Best Oil Stocks Of September 2023
With average costs of about $40 per barrel and many of its resources even cheaper, it can make money in almost any oil market environment, enabling the company to generate lots of cash flow. Specifically, CTRA was paying a fixed dividend of 12.5 cents per share at the end of 2021 before increasing that to 15 cents per share quarterly across 2022 and now 20 cents quarterly this year. Coterra is an independent oil and gas company focused on hydraulic fracturing of shale to extract fossil fuels, a process known as fracking. It has operations across the U.S., from the Marcellus Shale region that spans the northeast U.S. around Pennsylvania to the Permian Basin of New Mexico and west Texas and the Anadarko Basin around Oklahoma. There are plenty of generous dividend payers on this list, and Diamondback is worth a look for its income potential.
The company has consistently paid strong dividends to investors for the past 29 years, even when oil and gas prices have been down. Lower oil and gas prices have caused natural gas-focused drillers and private producers to pull back on drilling new wells, and now service companies have excess capacity. That’s allowing Devon to lock in lower service rates as contracts come up for renewal. Lower service costs will enable the company to drill the same number of wells for less money, freeing up cash. A company may sport a high dividend yield, but if it’s not in good financial health, that alluring dividend may not be around for long. With the above-mentioned companies, however, investors hunting for oil dividends to power their portfolios don’t need to worry much.
Earnings have benefited from higher commodity prices and better-than-expected production volumes. Oilfield services companies can also see big swings in profitability driven by oil prices. If oil prices go down, drilling becomes less profitable, and producers are less likely to spend money on equipment and services.