While the energy sector still has a long way to go, and $100 a barrel oil is probably going to stay in the rear-view mirror for the foreseeable future, there is some positive news. Institutional portfolios are finally starting to add to their allocations of energy, and while historically still very low, they are up sharply from the 33% underweighting from September.

In a new report, Merrill Lynch feels that current Wall Street estimates may be too high, and many of the exploration and production companies are pricing oil in the $65 range, quite a jump from the $46.38 spot price on Friday’s close. One positive item for investors, is that Merrill Lynch likes the traditionally lower risk companies to stay invested in oil, and the midyear pullback has left valuations with as much upside as higher beta stocks.

Four of Merrill Lynch’s current top pick energy stocks also offer dividends that are in some cases outstanding. All are rated Buy at Merrill Lynch.

Anadarko Petroleum

This stock routinely shows up across Wall Street as a top stock to buy in the energy sector. Anadarko Petroleum Corp. (NYSE: APC) is one of the world’s largest independent exploration and production companies, with operations in all major domestic drilling areas, as well as in South America, Africa, Asia and New Zealand. As of year-end 2014, the company had approximately 2.86 billion barrels-equivalent of proved reserves.

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Anadarko reported very solid second-quarter results on stronger production and lower exploration costs. Its revenue of $2.64 billion in the period surpassed Wall Street forecasts, and its profit of $61 million came to $0.12 per share. Adjusted for non-recurring gains, earnings were a penny per share.

With liquids growing as a greater percentage of the overall business, and savings being redeployed to add more wells, the analysts feel the stock remains a compelling buy. Anadarko is expected to report third-quarter earnings on October 27.

Anadarko investors are paid a 1.47% dividend. The Merrill Lynch price target on the stock is a stout $104. The Thomson/First Call consensus price target stands much lower at $87.43. The stock closed Friday at $73.39.

ConocoPhillips

This one may offer investors some of the best total return possibilities, and the Merrill Lynch sees it as a top yield play. ConocoPhillips (NYSE: COP) is a large integrated that has spent the past five years divesting assets and, although it is cash rich, the company has somewhat dampened earnings and growth expectations all year long. With oil still looking for a bottom, and the market watching events in the Middle East, many analysts may feel more comfortable with the stock. Conoco’s big production ability in the Eagle Ford could bode well for the future.

Merrill Lynch feels Conoco can accelerate growth from reloaded portfolio depth in the Bakken and Eagle Ford, with visibility on future growth from a newly disclosed sizable position in the Permian. Wall Street analysts have applaud the company’s cuts in unnecessary spending, and the possibility of increased sales of noncore assets.

Investors are paid a very strong 5.36% dividend. The Merrill Lynch price target is $74. The consensus target is $63.09, and the stock closed out Friday at $55.23.

Hess

This top company is often the subject of takeover chatter on Wall Street. Hess Corp.’s (NYSE: HES) market capitalization has fallen to just over $17 billion, so the company could fall prey to larger integrated as a quick bolt-on acquisition to boost growth. Hess has been undergoing somewhat of a transition from an integrated oil and gas company to a predominantly exploration and production entity. The company is shifting its growth approach from high-impact exploration to a smaller, more focused exploration portfolio.

Hess announced the closure of its Port Reading refinery earlier this year, marking its complete exit from the refining business. Hess Indonesian assets were sold, and the company has indicated that assets in Thailand, as well as its terminals, retail, energy marketing and trading businesses in the downstream, will be on the block. More reasons the company becomes a valuable takeover asset.

Hess shareholders are paid a 1.65% dividend. Merrill Lynch has price target of $85, and the consensus target is $71.02. Shares closed Friday at $61.03.

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Occidental Petroleum

This top energy stock is another high-yielding domestic stock in the energy sector. Occidental Petroleum Corp. (NYSE: OXY) announced last year it will continue to grow dividends and expects to begin buying back more shares this year and beyond, a double plus for shareholders.

Analysts feel that Occidental faces the rebounding oil price correction with the strongest balance sheet in the sector, with net cash at year end 2014 was estimated at around $1.7 billion, and a whopping $11 per share of cash available for buy backs. With chemicals and other products helping to blunt the drop in oil, Occidental is well positioned to continue to ride out the storm.

The company announced recently a deal with Ecopetrol to invest up to $2 billion over the next decade to increase production at the La Cira-Infantas oil field in Colombia. According to Reuters, the new round of investments will increase production in the region by more than 200 million barrels. This comes on the heels of Occidental selling its under-performing acreage in the Bakken shale.

Occidental shareholders are paid an outstanding 4.04% dividend. The $95 Merrill Lynch price target is well above the consensus target of $78.45. The stock closed on Friday at $74.23.

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When you can add top energy stocks to a portfolio that have the upside potential of much higher beta stocks, along with the steady and solid dividends, that is a recipe for long-term investing success.

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