For example, over the past 10 years the price of crude oil has gone from as high as nearly $110 a barrel to as low as less than $20 a barrel at the start of the Covid-19 pandemic. The value of energy stocks tends to track energy prices, making these investments more volatile and potentially riskier than stocks in other sectors. By market cap, ExxonMobil is the largest non-government-owned energy company in the world.
- That works out to a consensus recommendation of Buy, with high conviction.
- Really, it’s a crummy framework for regular hardworking Americans – I get that.
- The benchmark ETF for the space, the Alerian MLP ETF (AMLP), yields 5.6% as I write this.
It is exactly the kind of company you would expect to pay a reliable dividend. Now that management is more on board with that, the generous 6% or so dividend yield is probably worth a closer look, but only if you can look past the 2016 cut. With rising geopolitical tensions in Russia and Ukraine, this could lead to oil prices pushing higher over the coming months. Russia being the third largest oil producer in the world, U.S. oil producers will have to meet this pent up demand.
Preparing for the future
The oil company established the industry’s first fixed-plus-variable dividend framework a few years ago. It pays a base quarterly dividend it can sustain at lower oil prices, and on top of that, it adds up to half its excess free cash in variable dividends. Energy prices can swing widely and rapidly, depending on the state of the global economy.
Overall, ConocoPhillips expects to return more than 30% of its anticipated cash flow to shareholders in 2022 and anticipates delivering low single-digit production growth in 2022. 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. Many producers plan to return a large portion of their oil-fueled windfall to shareholders. Devon Energy (DVN 3.64%), Pioneer Natural Resources (PXD 3.30%), and ConocoPhillips (COP 3.10%) stand out as the top oil stocks to buy for investors seeking to cash in on the OPEC-led support of the oil market. These are the oil and gas stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio.
They have delivered underlying value to shareholders via sustained dividends, and their scale can help them thrive when navigating the ups and downs of constantly fluctuating crude prices. The company’s assets are in the Permian, Eagle Ford, Bakken, and Oklahoma. As of December 2022, Marathon reported proved reserves of 1,338 million barrels of oil equivalent. A strong asset base provides visibility for sustained production and cash flow upside. Higher oil prices mean Pioneer Natural Resources will generate even more free cash flow, giving it more money to return to shareholders.
Even so, that doesn’t mean there are few opportunities in the oil patch. Here’s a closer look at some of the top oil stocks and factors to consider before buying oil stocks. First, sometimes I’ll receive bad-faith criticisms about a company’s description. Second and more importantly, COP represents one of the biggest oil stocks levered to the upstream component of the energy supply chain.
In September it announced a refinancing plan, issuing $550 million in senior secured second lien notes at 8.5%, due in 2030. The company said it would use the funds to pay off debt, which at the end of the second quarter stood at $510.8 million. The Street is upbeat here, with eight Buys, two Holds and just one Sell among analysts that have sounded off over the past three months. EOG posted revenues of $5.6 billion in Q2, a decline of 25% year-over-year. Adjusted earnings came in at $2.49 per share versus $2.74 in the same period a year ago. We believe everyone should be able to make financial decisions with confidence.
On the plus side, there’s always the chance that the naysayers could be wrong. If they are, CVI shares could be among the more profitable oil stocks. As increased consumer activity has demonstrated, Americans may be over Covid-19-related concerns, irrespective of omicron or another possible variant. One of the riskier components of the fossil-fuel industry, downstream companies like CVR Energy heavily depend on consumer confidence and overall economic activity. As the refining and marketing component of the energy supply chain, downstream firms convert fossil fuels into usable consumer products such as gasoline.
If these factors weren’t enough to convince you that FANG represents one of the top oil stocks to buy, Gurufocus.com labels shares modestly undervalued. With a myriad of upside catalysts available for the hydrocarbon sector, investors have every incentive to consider the top oil stocks to buy. For this list of potentially intriguing market ideas, we’ll look at some of the best companies in the field, with varying risk-reward profiles.
FANG returned 35.5% last year, which actually made it a sector laggard. Meanwhile, the Street’s average target price of $144.87 gives EOG stock implied upside of about 23% in the next year or so. Indeed, the Energy Select Sector SPDR Fund (XLE), which is the largest and most widely traded oil exploration ifc markets review and production exchange-traded fund, generated a total return of more than 64%. Because of this dynamic, investors need to be careful when choosing oil stocks. They should focus on companies that can survive rough patches since they’ll be better-positioned to thrive when markets turn healthy again.
The Best And Worst Ways To Buy Into Oil Stocks In 2022
Over the past seven years, the company has self-funded its capital expenditures and dividends. In response to the collapse of energy prices during the Covid-19 pandemic, Royal Dutch Shell cut its dividend, a blow to income investors who held its stock. It also shifted a sizable share of its spending away from capital projects for oil and gas and is now focusing more on the development of renewable energy projects. The framework works in investors’ favor, as Chevron’s stable and growing dividends can hugely help investors navigate any volatility in the oil markets.
It could pay a higher variable dividend and repurchase more of its lower-priced shares. Pioneer Natural Resources also has a well-defined capital return program. It set a framework of returning at least 75% of its free cash flow to investors, and the bedrock of that strategy is a sustainable and growing base dividend. The oil company has the flexibility to return more cash to shareholders through variable dividends and opportunistic share repurchases.
It’s a good idea to read up on the stocks you want to buy before you dive in. Industry news coverage, analyst reports and company financial statements can help you get more comfortable with your decision. Prices on the futures market represent the beliefs of sophisticated investors who have detailed knowledge of oil discovery, production and shipping. But shares in oil producers can also be vulnerable to downturns in the oil market that affect their ability to make a profit on what they pull out of the ground. There are several types of oil companies whose stock is publicly traded — each with their own set of potential upsides and drawbacks.
types of oil stocks
Oil prices have been roughly cut in half from their 2022 highs around $120 a barrel. Thanks to falling crude prices, oil stocks are on the backfoot this year. The best oil stocks have been caught up in the volatility, but their more modest declines illustrate the long-term staying power unmatched by more fashionable energy atfx forex broker review plays. For 36 consecutive years, Chevron has increased its dividend, and its dividend growth may very well continue to rise in the near future. Management has said it expects to increase its distribution to shareholders over the next five years if the price of Brent crude oil averages more than $50 per barrel.
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. But if you do want to hold oil in your portfolio, there are plenty of ways to do it. Below are five options for investing in oil, ranked from worst to first.
Also, OPEC is sticking with its plan to increase oil production only gradually per month. That’s good news for Devon Energy shareholders as the company’s cash flows, and therefore variable dividend, depend on oil prices. Of course, not all oil stocks are created equal, and the sector still faces plenty of headwinds. And even if it doesn’t, recovery-chasing increases in axitrader review production are forecast to limit upside in crude oil prices from current levels. The tightening of supply and the recovery in global demand certainly bodes well for many oil and gas companies, and some could be huge winners in the near term. However, if energy investors should have learned anything over the past decade, it’s that market conditions can change quickly.