Energy
Back Up the Truck for Big Dividend Energy Stocks as Oil Drops Below $80 a Barrel
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On Friday, January 1, 2021, West Texas Intermediate crude was trading at $48.52 a barrel and Brent crude was trading at $51.82. Both are now hovering around the $80 mark, and the analysts at Goldman Sachs think the $90 level is all but a given, despite some of the factors that resulted in the selling recently. With oil currently at the highest levels in seven years, many investors and traders may be thinking it’s time to sell, but the reality is that many of the stocks in the industry, while certainly higher than in January, have room to run.
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Highlighting the recent pullback were numerous items, not the least of which is that more production is coming online. Given the speed that the economy has come back, and the reluctance of OPEC to ramp up their output, that means higher prices are almost a given. Plus, the backup in oil prices has some taking profits, and that is offering investors an outstanding entry point for some of the top companies in the industry.
We screened our 24/7 Wall St. energy research database looking for Buy-rated integrated oil stocks both domestic and foreign reach and with the highest dividends. We found five that look like outstanding and relatively safe ideas now. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
BP
This is one of the premier European integrated oil giants, and Goldman Sachs is very positive on the shares. BP PLC (NYSE: BP) engages in the energy business worldwide. It produces and trades in natural gas; offers biofuels; operates onshore and offshore wind power and solar power generating facilities; and provides de-carbonization solutions and services, such as hydrogen and carbon capture, usage and storage.
The company is also involved in the convenience and mobility business, which manages the sale of fuels to wholesale and retail customers, convenience products, aviation fuels, and Castrol lubricants. It is involved in refining, supply and trading of oil products, as well as operation of electric vehicle charging facilities. In addition, it produces and refines oil and gas, and it invests in upstream, downstream and alternative energy companies, as well as in advanced mobility, bio and low carbon products, carbon management, digital transformation and power and storage areas.
Shareholders receive a 4.69% yield. The Goldman Sachs price target for the domestic shares is $45, which is higher than the $35.22 consensus target. The final BP stock trade for Monday was reported at $27.55.
Chevron
This energy giant is a solid way for investors who are more conservative to be positioned in the sector. Chevron Corp. (NYSE: CVX) is a U.S.-based integrated oil and gas company, with worldwide operations in exploration and production, refining and marketing, transportation and petrochemicals. The company sports a sizable dividend, and it has a solid place in the sector when it comes to natural gas and liquefied natural gas (LNG).
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With the strongest financial base of the majors, coupled with an attractive relative asset base, many on Wall Street feel that Chevron offers the most straightforwardly positive risk/reward. Although current conditions do not warrant a large focus on production growth, Chevron possesses numerous medium-term drivers that should support production levels in the coming years.
Shareholders receive a 4.69% dividend, which the analysts feel comfortable will remain at current levels. BofA Securities has a $140 price target on Chevron stock, while the consensus target is $127.42. The stock closed on Monday at $116.82.
Exxon Mobil
Shares of this mega-cap energy leader backed up nicely as oil sold off in August, and they still offer investors an incredible entry point. Exxon Mobil Corp. (NYSE: XOM) is the world’s largest international integrated oil and gas company. It explores for and produces crude oil and natural gas in the United States, Canada, South America, Europe, Africa and elsewhere.
Exxon also manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and specialty products, and it transports and sells crude oil, natural gas and petroleum products.
The company announced last month that ExxonMobil Catalysts and licensing has introduced ExxonMobil Renewable Diesel (EMRD) process technology to help meet the evolving needs for mobility, while utilizing renewable feedstock. This new process technology converts feedstocks including, but not limited to, vegetable oils, unconverted cooking oil and animal fats, into renewable diesel. Due to significant interest in producing renewable jet fuel as a primary product, Exxon is also developing advanced catalyst and process technology solutions that will offer EMRD process licensees flexibility to tailor the amount of jet fuel versus diesel produced.
Exxon Mobil stock investors receive a 5.52% dividend, which many feel will continue to be defended. The $95 BofA Securities price target is well above the $70.91 consensus target. Shares closed at $64.37 on Monday.
24/7 Wall St.Royal Dutch Shell
This is a top international play for investors looking to add energy exposure and is yet another company that posted solid results. Royal Dutch Shell PLC (NYSE: RDS-A) operates as an independent oil and gas company worldwide through its Upstream and Downstream segments. The company explores for and extracts crude oil, natural gas and natural gas liquids.
Shell also converts natural gas to liquids to provide fuels and other products; markets and trades crude oil and natural gas; transports oil; liquefies and transports gas; extracts bitumen from mined oil sands and converts it to synthetic crude oil; and generates electricity from wind energy.
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In addition, the company engages in the conversion of crude oil into a range of refined products, including gasoline, diesel, heating oil, aviation fuel, marine fuel, liquefied natural gas for transport, lubricants, bitumen and sulphur; production and sale of petrochemicals for industrial customers; refining; trading and supply; pipelines and marketing; and alternative energy businesses.
The dividend yield is 3.71%. BofA Securities has set a $63 price objective. The $59.07 consensus target on Royal Dutch Shell stock compares with the most recent close at $45.28.
24/7 Wall St.TotalEnergies
This French integrated giant is another great way to play the energy rally from the European side. TotalEnergies S.E. (NYSE: TTE) operates as an integrated oil and gas company worldwide. Its Exploration & Production segment is involved in oil and natural gas exploration and production activities in approximately 50 countries.
The company’s Integrated Gas, Renewables & Power segment engages in the LNG production, shipping, trading and regasification activities; trading of liquefied petroleum gas (LPG), petcoke and sulfur, natural gas and electricity; transportation of natural gas; electricity production from natural gas, wind, solar, hydroelectric and biogas sources; energy storage activities; and development and operation of biomethane production units, as well as provides energy efficiency services.
The Refining & Chemicals segment is involved in refining petrochemicals, including olefins and aromatics; and polymer derivatives, such as polyethylene, polypropylene, polystyrene and hydrocarbon resins, as well as biomass conversion and elastomer processing. This segment also engages in trading and shipping crude oil and petroleum products.
The Marketing & Services segment produces and sells lubricants; supplies and markets petroleum products, including bulk fuel, aviation and marine fuel, special fluids, compressed natural gas, LPG and bitumen; and provides fuel payment solutions. It operates approximately 15,500 service stations.
Investors receive a 5.18% dividend. Piper Sandler has a $66 price target. The posted consensus target is $59.38, and TotalEnergies stock closed trading at $49.78 on Monday.
These five mega-cap integrated leaders pay very solid dividends and have some serious upside to their various price targets. Plus, they all dominate in their geographical locations, and perhaps they offer more safety for investors with less risk tolerance. One caveat for investors considering the European ideas is that many foreign governments automatically withhold taxes on dividends paid by companies incorporated within their borders. For most taxable accounts, this means that a certain percentage of your dividend will be withheld by your broker.
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