If there’s one thing investors can expect when they put money into the energy sector, it’s volatility. As commodities, oil and natural gas have a long history of rapid and often dramatic price fluctuations.
This is why investors focused on this sector should probably consider sticking with the biggest and best companies, which are generally integrated energy giants such as: chevron(NYSE:CVX) and total energy(New York Stock Exchange: TTE). For investors looking for high yields, here’s why these two stocks stand out today.
There are some companies with longer consecutive years of annual dividend increases, but you need to evaluate them. Chevron’s 37 consecutive annual dividend increases is impressive considering the highly volatile nature of the industry in which it operates. Stocks can be purchased for less than $500 each. dividend yield 4.1% is very respectable. For comparison, S&P500 yields just 1.2%, and the average energy stock yields just 3.1%.
Image source: Getty Images.
The above-average yield is backed by energy company It has a broadly diversified portfolio spanning the upstream (energy production), midstream (pipelines) and downstream (chemicals and refining) segments of the industry. Moreover, its asset portfolio is spread all over the world.
Taken together, this diversification helps smooth out the periodic peaks and troughs in energy prices. Chevron also has one of the strongest balance sheets, with a debt-to-equity ratio of 0.17x. That’s a low number for any company, but importantly, it gives management room to take advantage of leverage to fund the business (and the dividend) during a downturn in the energy industry.
Chevron isn’t firing on all cylinders right now. is having difficulty completing its acquisition of hesshas business relationships with some of Chevron’s major competitors. Production in the third quarter of 2024 increased 7% year-on-year, but return on capital employed, a key industry performance benchmark, declined slightly and weak energy prices weighed on top and bottom lines. Ta.
But he points out that this is to be expected in the energy industry, and that Chevron has added a little leverage to allow the business to continue operating as usual. If history is a guide, Chevron will weather the turmoil it faces, continue to reward investors with increased dividends, and grow its business over the long term.
If you’re looking for a pure high-yield energy stock that can weather the sector’s ups and downs, Chevron is probably one of your best options. But what if you look to the future and believe that clean energy will play an increasingly important role in the global energy market? Chevron is not investing as heavily in this area, so it won’t work out Possibly.
However, Total Energies is investing in this space, and its integrated power division (where clean energy investments are made) will account for an effective 10% of adjusted segment operating profit through the first nine months of 2024. occupied.
It’s actually not unusual for TotalEnergies to invest in things like solar and wind power. European peers blood pressure and shell I’ve been doing the same thing. However, both companies cut their dividends when they announced their intention to pivot to clean energy. And since then, both companies have rolled back some of their clean energy efforts.
TotalEnergies has not cut its dividend and remains committed to clean energy. Rather, the company is accelerating its plans.
TotalEnergies is still primarily an energy company, as approximately 90% of its operating profit is still related to the oil and gas sector. But for investors looking to hedge their energy bets a little, given that clean energy is gradually displacing dirtier energy sources such as oil, there are a number of options among the integrated oil majors. Total Energy is likely to be the best option. And the yield is 5.8%. (U.S. investors must pay foreign taxes on that income, but will be able to claim a partial refund on April 15.) The company’s stock price is even lower than Chevron’s.
Given the volatile nature of oil prices, most investors should not try to fence this sector, or worse, try to predict the direction of commodity prices. It’s much better to own a well-run company that is strong enough to weather the ups and downs of the industry. Chevron and Total Energy have both proven that it is possible. One of the main differences between the two right now is that TotalEnergies offers a bit of a clean energy hedge (if you’re interested).
Before buying Chevron stock, consider the following:
of Motley Fool Stock Advisor Our analyst team has identified what they believe Best 10 stocks Investors can buy now…and Chevron wasn’t among them. These 10 stocks have the potential to generate impressive returns over the next few years.
when to think about it Nvidia This list was created on April 15, 2005…if you invested $1,000 at the time of recommendation. you have $822,755!*
stock advisor provides investors with an easy-to-understand blueprint for success, including guidance on portfolio construction, regular updates from analysts, and two new stocks each month. ofstock advisorFor the service more than 4 times The resurgence of the S&P 500 since 2002*.
ruben greg brewer I have a position in TotalEnergies. The Motley Fool has a position in and recommends Chevron. The Motley Fool recommends BP. The Motley Fool has Disclosure policy.
/cdn.vox-cdn.com/uploads/chorus_asset/file/25784216/247333_EOY_Package_Check_In_CVirginia_NINTENDO.jpg?w=420&resize=420,280&ssl=1 "10 great Nintendo Switch games to check out in 2024")
