Two Outstanding High-Earning Energy Companies Worth Purchasing Immediately for Under $500 Each
Two Outstanding High-Earning Energy Companies Worth Purchasing Immediately for Under $500 Each
If investing in the energy sector is a given, investors should anticipate encountering instability. Both oil and gas, as commodities, have a storied history of rapid, often intense price shifts.
As a result, prudent investors contemplating the sector might want to focus on the most dominant and distinguished firms, which often equates to integrated energy titans such as Chevron (CVX with a 0.78% increase) and TotalEnergies (TTE, with a 0.73% surge). Presently, these two stocks are compelling options for investors seeking remarkable yields.
Chevron's dividend continues to set new heights each year
Although there are companies with longer sequences of successive annual dividend enhancements, recognition is due. Chevron's 37 uninterrupted years of annual dividend developments stand out, considering the fluctuating landscape of the industry it operates within. At present, the shares can be procured at a price inferior to $500, and the encouraging dividend yield amounts to 4.1%. For perspective, the S&P 500 returns a mere 1.2%, while the average energy stock's yield amounts to a mere 3.1%.
The aforementioned above-average yield is underpinned by an energy giant with a diverse range of holdings encompassing the following sectors: upstream (energy production), midstream (pipelines), and downstream (chemicals and refining). Moreover, its portfolio of assets spans the globe.
Collectively, this diversity smooths the peaks and valleys that energy prices often traverse. Chevron boasts one of the strongest financial healths, with a debt-to-equity ratio of 0.17 times. This figure is lower than what could be considered typical, providing management ample discretion in acquiring leverage to fund operations (and the dividend) during cyclical downturns in the energy industry.
Chevron is not currently performing at its best, experiencing challenges closing its transaction with Hess, which has business relations with some of Chevron's primary competitors. Although production surged 7% year-over-year during the third quarter of 2024, the return on capital employed (a significant sector performance index) dipped slightly, and lower energy prices created headwinds for both income and expenses.
Yet, Chevron's performance issues are par for the course in the energy industry, with Chevron likely to persevere, maintain growing dividends, and expand its business as the industry cycles.
TotalEnergies is deploying funds to secure its future while still raking in oil revenue
If your investment strategy emphasizes pure-play, high-yield energy stocks that can navigate the highs and lows of the sector, Chevron could be one of your preferred options. However, if you predict that clean energy will progressively assume a more substantial role in the global energy market, you may wish to steer clear of Chevron, as it is not allocating considerable capital in the segment.
TotalEnergies, alternatively, is investing in the sector, with its clean energy division (where clean energy investments reside) accounting for a notable 10% of adjustable segment operating income through the initial nine months of 2024.
It is not unique that TotalEnergies is dabbling in solar and wind power. European counterparts BP and Shell have also adopted this strategy. Nonetheless, they both slashed their dividends when proclaiming their intention to shift towards clean energy, followed by subsequently attenuating their clean energy commitments.
TotalEnergies, however, did not reduce its dividend and has sustained its clean energy commitment. If anything, the company has escalated its clean energy objectives.
With roughly 90% of operating income still tied to the oil and gas sectors, TotalEnergies structures itself predominantly as an energy company. Nevertheless, for investors aspiring to mitigate their energy exposure to some extent, given that clean energy is gradually displacing less environmentally-friendly alternatives like oil, TotalEnergies is perhaps the most appropriate choice among integrated oil majors. Its yield amounts to 5.8%, although U.S. investors will be required to pay foreign taxes on that income – taxes which can be partially reclaimed during tax season (April 15th). The company's share price is even lower than that of Chevron.
In light of the instability in the energy sector, diversifying investments can be prudent. For those seeking high-yield options, TotalEnergies (TTE) offers a compelling 5.8% yield, despite its primary focus on oil and gas. However, the company has allocated 10% of its adjustable segment operating income towards clean energy, demonstrating its forward-thinking approach to finance and investing.
With TotalEnergies currently offering lower shares than Chevron, investors interested in minimizing their energy exposure while still benefiting from oil revenue could find this integrated energy titan an attractive option.