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In this article, we discuss 12 best energy dividend stocks to buy now. You can skip our detailed analysis of the energy sector's performance and other energy dividend stocks, and go directly to read 5 Best Energy Dividend Stocks to Buy Now.
With rising oil prices and increased demand for renewables, energy stocks are booming during this bear market. Investors around the world are increasing their bets on energy stocks due to the sector’s outperformance this year. According to an MLIV Pulse survey conducted by Bloomberg this September, two-thirds of the respondents of the survey plan to increase their investments in the energy sector over the next six months. The respondents expect fuel shortages later this year due to the ongoing Russian war.
The energy sector in the S&P 500 has endured the 40-year high inflation better than the broader market, coming through as the only industry to generate positive returns this year. As of the close of October 21, the S&P 500 Energy is up 57.8% year-to-date. Analysts are projecting massive gains in the sector's earnings given the ongoing trend that has put energy securities in the spotlight. In its latest report, Reuters referred to the data from Refinitiv, forecasting energy companies’ earnings per share growth of 121% in the third quarter, compared with the same period a year ago. Moreover, energy is the only sector in the S&P 500 to report positive revisions to their Q3 earnings, according to Credit Suisse.
The ongoing volatility in the US stock market has made investors lean on defensive names. Energy dividend stocks with stable yields and strong cash flows are increasingly becoming shareholders’ top preferences. The Energy Select Sector SPDR Funds, which tracks the performance of some of the prominent energy stocks like Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and Devon Energy Corporation (NYSE:DVN), showed a dividend growth of 41% over the last year and has a dividend yield of 3.89%, as of October 23. In the third quarter of 2022, energy companies in the S&P 500 distributed $16.4 billion in dividends, which shows a 49% growth from last year’s dividend payments of $11 billion, according to Bloomberg. In addition to dividend growth, energy stocks are steadily outspending their cash flows on special dividends and share buybacks. According to a report by Deloitte, energy companies’ free cash flow could reach over $1.4 trillion this year. The report further mentioned that with these levels of cash flow and inclination to a low-carbon economy, the sector is expected to go debt-free by 2030. In view of this, we will discuss the best energy dividend stocks to buy now.
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Our Methodology:
We selected dividend stocks from the energy sector with solid dividend histories and strong balance sheets. In addition to this, these companies have sound financial health to support their dividends in the future as well. The stocks are ranked according to their dividend yields.
12 Best Energy Dividend Stocks to Buy Now
12. Occidental Petroleum Corporation (NYSE:OXY)
Dividend Yield as of October 23: 0.73%
Occidental Petroleum Corporation (NYSE:OXY) is a Texas-based multinational chemical industry company that is engaged in hydrocarbon exploration. The company also deals in the manufacturing of petrochemicals. In the second quarter of 2022, it reported a strong cash position with an operating cash flow of $5.3 billion. During the quarter, the company repurchased over 18 million of its shares for approximately $1.1 billion.
Occidental Petroleum Corporation (NYSE:OXY) currently pays a quarterly dividend of $0.13 per share and has a dividend yield of 0.73%, as of October 23. The company raised its quarterly dividend in February 2022, which was its first dividend hike after the pandemic.
Ahead of the company's Q3 results, Barclays raised its price target on Occidental Petroleum Corporation (NYSE:OXY) to $84 and maintained an Overweight rating on the shares.
At the end of Q2 2022, 66 hedge funds tracked by Insider Monkey owned stakes in Occidental Petroleum Corporation (NYSE:OXY), compared with 67 in the previous quarter. The collective value of these stakes is over $13.7 billion. With stakes worth over $9.3 billion, Berkshire Hathaway was the company's leading stakeholder in Q2.
In addition to some of the best dividend stocks like Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and Devon Energy Corporation (NYSE:DVN), Occidental Petroleum Corporation (NYSE:OXY) is also gaining investors' attention in 2022.
Smead Capital Management mentioned Occidental Petroleum Corporation (NYSE:OXY) in its Q3 2022 investor letter. Here is what the firm has to say:
“Our top-performing stocks in the quarter includes Occidental Petroleum (NYSE:OXY). Oil and gas have been the best game in the stock market town this year and it was a pleasant surprise to see home builders pick up even with dour news on interest rates and the economy. For the first three quarters of the year, we should change the name of our fund to the Jed Clampett Fund. Occidental Petroleum (NYSE:OXY), was one of the standouts. Up through the bear market came a “bubblin’ crude!”
11. Hess Corporation (NYSE:HES)
Dividend Yield as of October 23: 1.11%
Hess Corporation (NYSE:HES) is a New York-based multinational independent energy company that specializes in the production and exploration of crude oil and natural gas. The company is one of the best dividend stocks on our list as it has raised its dividends at a CAGR of 6.58% in the past five years. It currently pays a quarterly dividend of $0.375 per share and has a dividend yield of 1.11%, as of October 23.
During the second quarter of 2022, Hess Corporation (NYSE:HES) returned $306 million to shareholders including dividends. The company also repurchased 1.8 million shares for $190 million. It generated $846 million in free cash flow, up from $117 million during the same period last year. Moreover, the company reported an operating cash flow of $1.5 billion, compared with $785 million in the prior-year quarter.
Wells Fargo called Hess Corporation (NYSE:HES) one of its top picks due to the company's strong return to shareholders. In October, the firm raised its price target on the stock to $147 with an Overweight rating on the shares.
At the end of June 2022, 35 hedge funds tracked by Insider Monkey owned stakes in Hess Corporation (NYSE:HES), down from 40 in the previous quarter. These stakes have a consolidated value of over $1.18 billion. With over 4.4 million shares, Fisher Asset Management was the company's leading stakeholder in Q2.
10. Marathon Oil Corporation (NYSE:MRO)
Dividend Yield as of October 23: 1.10%
Marathon Oil Corporation (NYSE:MRO) is an American energy company that runs international gas operations. The company explores the most competitive resource plays in the country. As energy stocks are getting back on solid footing after the pandemic, Piper Sandler lifted its price target on MRO to $38 in October, with an Overweight rating on the shares.
Marathon Oil Corporation (NYSE:MRO) is one of the best dividend stocks on our list as the company has a 5-year run of consistently raising its dividends. The company currently offers $0.08 per share in quarterly dividends for a dividend yield of 1.10%, as of October 23. During Q2 2022, it returned $816 million to shareholders, $56 million of which represented dividend payments. Marathon Oil Corporation (NYSE:MRO) generated $1.2 billion in free cash flow, which smoothly covered its dividend payments.
As of the close of Q2 2022, 41 hedge funds tracked by Insider Monkey reported owning stakes in Marathon Oil Corporation (NYSE:MRO), down from 43 in the previous quarter. These stakes have a collective value of over $1.26 billion. Among these hedge funds, D E Shaw is one of the company's most prominent stakeholders.
Carillon Tower Advisers mentioned Marathon Oil Corporation (NYSE:MRO) in its Q1 2022 investor letter. Here is what the firm has to say:
“Stock selection contributed the most while sector allocation was also positive. An underweight to communication services and an overweight to energy helped performance, while an underweight to consumer staples and an overweight to materials detracted. Stock selection was strong within healthcare and materials but was weak within information technology and industrials. Marathon Oil (NYSE:MRO) increased its quarterly dividend and executed an impressive share buyback that blew by the target it originally announced.”
9. Cenovus Energy Inc. (NYSE:CVE)
Dividend Yield as of October 23: 1.69%
Cenovus Energy Inc. (NYSE:CVE) is a Canadian integrated oil and natural gas company that also focuses on oil sand assets. In Q2 2022, the company generated stable cash flow, showing growth on nearly all accounts. It reported an operating cash flow of $3 billion, compared with $1.3 billion in the prior-year quarter. The company's adjusted funds flow came in at $3.1 billion, up from $2.5 billion during the same period last year.
Cenovus Energy Inc. (NYSE:CVE) currently pays a quarterly dividend of C$0.105 per share for a dividend yield of 1.69%, as of October 23. The company tripled its dividend in April this year, which also marked its second consecutive dividend hike after the pandemic of 2020.
In October, Jefferies initiated its coverage on Cenovus Energy Inc. (NYSE:CVE) with a Buy rating and a C$35 price target, presenting a positive stance on energy transition names.
At the end of Q2 2022, 42 hedge funds in Insider Monkey's database owned stakes in Cenovus Energy Inc. (NYSE:CVE), compared with 44 in the previous quarter. These stakes have a total value of roughly $3 billion.
L1 Capital mentioned Cenovus Energy Inc. (NYSE:CVE) in its Q2 2022 investor letter. Here is what the firm has to say:
“MEG Energy and Cenovus Energy Inc. (NYSE:CVE): We continue to remain positive on the outlook for Energy. While a potential U.S. recession would result in softer oil demand, we believe this would be more than outweighed by China re-opening over the coming year (which would see a major lift in car and air traffic). Oil supply continues to remain constrained with sustained declines in global inventories and OPEC+ remains unable to grow production significantly. With the sell-off in energy stocks, MEG and Cenovus are currently generating more than 20% of their market cap in cash flow with large dividends and share buybacks to come. (Click here to view the full text)
8. Coterra Energy Inc. (NYSE:CTRA)
Dividend Yield as of October 23: 2.04%
Another energy company that makes it to our list of the best dividend stocks is Coterra Energy Inc. (NYSE:CTRA). Since the start of 2022, the stock delivered a 51.6% return to shareholders while its 12-month return came in at 31.5%, as of the close of October 21.
Coterra Energy Inc. (NYSE:CTRA) has been raising its dividends consistently for the past five years, with a CAGR of 32.6%. It currently pays a quarterly dividend of $0.65 per share with a dividend yield of 2.04%, as of October 23. During the second quarter of 2022, the company paid 80% of its free cash flow to shareholders in dividends.
In October, Barclays maintained an Equal Weight rating on Coterra Energy Inc. (NYSE:CTRA) with a $39 price target, ahead of the company's Q3 earnings.
As of the end of the June quarter, 40 hedge funds in Insider Monkey’s database owned stakes in Coterra Energy Inc. (NYSE:CTRA), up from 39 in the preceding quarter. The collective value of these stakes is over $437.3 million. With over 4.5 million stakes, Diamond Hill Capital owned the largest position in the company in Q2.
Palm Valley Capital Management mentioned Coterra Energy Inc. (NYSE:CTRA) in its Q2 2022 investor letter. Here is what the firm has to say:
“We sold two Fund positions during the quarter which includes Coterra Energy (NYSE:CTRA). As a result of surging oil and natural gas prices, Coterra reached our valuation, and we exited the position in April.”
7. Chesapeake Energy Corporation (NASDAQ:CHK)
Dividend Yield as of October 23: 2.27%
Chesapeake Energy Corporation (NASDAQ:CHK) is an Oklahoma-based exploration and production company. The company currently pays a quarterly dividend of $2.32 per share and has a dividend yield of 2.27%, as of October 23. In August, it raised its base dividend by 10% to $2.20 per share.
In the second quarter of 2022, Chesapeake Energy Corporation (NASDAQ:CHK) reported net cash provided by operating activities of $909 million. The company's free cash flow came in at $494 million. Its net income stood at over $1.2 billion or $8.27 per diluted share.
Jefferies presented a positive outlook on the energy sector in the current market environment and initiated its coverage on Chesapeake Energy Corporation (NASDAQ:CHK) with a Buy rating and a $150 price target.
The number of hedge funds tracked by Insider Monkey owning stakes in Chesapeake Energy Corporation (NASDAQ:CHK) grew to 67 in Q2 2022, from 59 in the previous quarter. These stakes have a total value of over $3.52 billion.
ClearBridge Investments mentioned Chesapeake Energy Corporation (NASDAQ:CHK) in its Q1 2022 investor letter. Here is what the firm has to say:
“In the early days of the invasion, we made two measured changes to the portfolio based on longer-term fallout we anticipate from Russia’s invasion of Ukraine. First, we initiated small positions in U.S. natural gas producers Chesapeake (NYSE:CHK).
Given its superior environmental profile compared to other fossil fuels, we have long favored natural gas in our energy holdings. Combustion of natural gas releases 50% less CO2 than coal, 25% less CO2 than gasoline and dramatically less particulate and pollution, per the U.S. Energy Information Administration. With the advances in shale production this century, the U.S. has become a natural gas powerhouse with some of the lowest-cost and largest reserves in the world. But because natural gas is difficult to ship across the ocean (it must be liquefied, which requires expensive infrastructure on both ends of the voyage), America’s gas bounty has ironically proved a burden for U.S. producers." (Click here to view the full text)
6. APA Corporation (NYSE:APA)
Dividend Yield as of October 23: 2.32%
APA Corporation (NYSE:APA) is an American holding company that is engaged in the exploration of hydrocarbons. In October, Piper Sandler raised its price target on the stock to $46 with a Neutral rating on the shares, appreciating the company's strong performance in the current environment. The firm also holds strong estimates about the company's Q3 earnings.
In September, APA Corporation (NYSE:APA) announced a 100% hike in its quarterly dividend to $0.25 per share. Moreover, the company also approved additional repurchase authorization of its 40 million shares. As of October 23, the stock's dividend yield came in at 2.32%. The company can be a good addition to dividend portfolios alongside some of the best dividend stocks, such as Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and Devon Energy Corporation (NYSE:DVN).
In the second quarter of 2022, APA Corporation (NYSE:APA) reported strong cash flows and a stable balance sheet. The company's operating cash flow came in at $1.5 billion, up from $891 million in the previous quarter. It generated $1.1 billion in free cash flow and expects the number to reach $3 billion in FY22.
At the end of Q2 2022, 36 hedge funds tracked by Insider Monkey reported owning stakes in APA Corporation (NASDAQ:APA), down from 46 in the previous quarter. These stakes are collectively worth over $745 million. Harris Associates was the company’s largest stakeholder in Q2.
Oakmark Funds mentioned APA Corporation (NASDAQ:APA) in its Q1 2022 investor letter. Here is what the firm has to say:
“Our oil holding, APA Corporation (NASDAQ:APA) (+54%) was one of our top contributors in the quarter as oil prices rallied due to tight supplies, which were then exacerbated by the Russian invasion of Ukraine. Although their share prices have increased considerably, both companies still look quite undervalued even using longer term oil prices in the $65-70 dollar range. Meanwhile, if times are good over the next couple of years, we expect these companies to return significant percentages of their market caps to shareholders.”
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Disclosure. None. 12 Best Energy Dividend Stocks to Buy Now is originally published on Insider Monkey.
