According to Factset, the Energy sector has posted the strongest earnings and revenue growth for the last quarter of 2017. This trend seems to continue during the first quarter of 2018. Exxon Mobil (XOM) even announced a strong dividend increase of 6.5% on April 25th 2018. This isn’t surprising considering the fact that so many companies lost money over the past 2 years. Now that the oil price is reaching toward $70, all expectations are guardedly optimistic.
What are the best opportunities in the market now? Here’s the complete list of strong dividend paying energy stocks.
Revenue, EPS and Dividend refer to 5 year growth:
| Ticker | Name | Rev 5yr | EPS 5yr | Div 5yr |
|---|---|---|---|---|
| ANDV | Andeavor | 3.25% | 11.03% | 53.22% |
| ANDX | Andeavor Logistics | 81.31% | 8.92% | 18.85% |
| EQM | EQT Midstream Partners | 33.06% | 42.05% | 59.87% |
| HEP | Holly Energy Partners | 9.20% | 7.54% | 6.74% |
| IPL.TO | Inter Pipeline | 13.39% | 6.03% | 9.09% |
| KEY.TO | Keyera | 3.01% | 10.42% | 9.88% |
| MMP | Magellan Midstream | 7.19% | 14.35% | 14.58% |
| PPL.TO | Pembina Pipeline | 9.55% | 17.03% | 4.91% |
| TRP.TO | TransCanada | 10.93% | 17.53% | 7.27% |
| WES | Western Gas Partners | 20.24% | 4.23% | 13.43% |
| WMB | Williams Companies | 1.42% | 18.94% | 0.06% |
| WPZ | Williams Partners | 67.45% | 7.05% | 11.26% |
| ZCL.TO | ZCL Composites | 2.01% | 8.23% | 54.23% |
The global markets for crude oil are experiencing continued modest consumption growth. This helps support the latest rally. Low oil prices eventually slow down the demand for new production. What has happened is most Exploration and Production (E&P) companies reduced the number of new projects in 2015-2017. Therefore, once all existing projects are at term, production growth will become anemic once again thereby opening the door for a stronger oil price.
Source: Ycharts
Combine this situation with consistent economic growth, and you are starting to get a recipe that will taste good! Did you know that in this beginning of the New Year, none of the industrial countries are in a recession? In other words; everything is fine across the globe.
During the recent crisis, integrated companies such as Exxon Mobil (XOM) and Chevron (CVX) sold non-core assets, restructured their business and became leaner. Most energy companies are now able to evolve with an oil barrel price around $50. When we reach near $70, we are talking about some serious profit.
On the other side, there are several countries exploring regulations around petroleum fueled cars vs. electric cars. With the rise of technology in this field, we might start seeing countries with a “100% green car policy”.
Oil is doing better, what about natural gas?
We can’t say that the natural gas price has been doing better lately. In fact, this is quite the opposite:
Source: Ycharts
The natural gas price is stagnating since 2015 and doesn’t show much hype. The combination of fracking and horizontal drilling pushes U.S. natural gas supplies to new highs, and prices to new lows. Many researchers have proven that there is enough natural gas in the States for the next 100 years. Let’s just say we are far from talking about a shortage.
However, cheap energy prices are not necessarily a bad thing. When you think about it, when a country can produce cheap energy, it means its companies are more competitive. Low cost energy will positively affect the energy company’s margins or give additional room for a price war against foreign competitors. Therefore, it’s not the best news for the industry, but it is great news for the rest of the market as the consuming industries enjoy overall lower costs of energy.
As technology evolves, our demand for energy stagnates while our production capacity improves. In other words; don’t expect natural gas prices to rise anytime soon. All factors are combined to keep it at a low level.
Energy sector dividend list is updated monthly
While this page cannot be taken as a source for stock recommendations, this is the perfect starting point to build or improve your portfolio. I wanted to create an oasis of stock ideas.
Here are the metrics I’ve used to build each list:
Dividend yield between 1.5% and 10% (I want stocks that pay dividend)
5-year revenue growth positive (I want growing businesses in my portfolio)
5-year normalized diluted EPS growth positive (growing earnings leads to more dividend growth)
5-year dividend growth positive (I want management committed to make me richer)
3-year dividend growth positive (management must not sleep on the job)
Payout ratio under 100% (I want those dividends to keep coming)
