Energy Stocks Are on Fire and These 5 Pay Lavish and Reliable Dividends

There has been a tsunami of Wall Street chatter recently about interest rates going higher. Many feel that the Federal Reserve could start raising interest rates by the end of 2022, or even sooner. In addition, many strategists think that the tapering of the quantitative easing program, where the Federal Reserve buys government bonds across the curve and mortgage debt, will be starting as early as this summer.

The bottom line for yield-starved investors is that interest rates, while surely higher than a year ago, are still at levels that remain close to generational lows, and despite a move higher, the benchmark 10-year U.S. Treasury still yields a puny 1.61%. In 2007 the bond had a 5.05% yield.

We screened our 24/7 Wall St. research database looking for companies in the red-hot energy sector that pay big dividends, and we found five that not only deliver dependable high yields but have the potential to go higher as oil nears the $70 level, which is the highest since 2018. It is still important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
[nativounit]

Chevron

This energy giant is a solid way for more conservative investors looking to be positioned in the energy sector. Chevron Corp. (NYSE: CVX | CVX Price Prediction) 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 has a solid place in the sector when it comes to natural gas and liquefied natural gas (LNG).

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 (Noble integration, Permian, TCO/WPMP expansion, Gulf of Mexico exploration, Vaca Muerta, and so on) that should support production levels in the coming years.

Shareholders receive a hefty 5.03% dividend, which the analysts feel will remain at current levels. The BofA Securities price target for the Buy-rated shares is $125. That compares to a Wall Street consensus target of $120.20. The last Chevron stock trade for Tuesday was reported at $106.65 per share.
[recirclink id=889334]

Shares of this mega-cap energy leader have been on fire but still have big upside potential. 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.

BofA Securities has a Buy rating on this integrated giant as well, and it said this after the company posted strong earnings for the quarter:

Earnings beat versus our estimate was entirely on chemicals with margins at a 10 year high. Solid quarter with debt down $4 billion quarter-over-quarter, cost initiatives on track and with the announced sale of UK non-core assets. Retain Buy as ExxonMobil has invested through the cycle which positions it to expand its future free cash flow to support dividends and stock buybacks.

The company pays investors a 5.78% dividend, which will continue to be defended. BofA Securities has a massive $90 price target, while the consensus target is $64.16. Exxon stock closed trading on Tuesday at $60.46 a share.
[recirclink id=888485]

Energy Transfer

The top master limited partnership (MLP) is a very safe way for investors looking for energy exposure and income. Energy Transfer L.P. (NYSE: ET) owns and operates one of the largest and most diversified portfolios of energy assets in the United States, with a strategic footprint in all the major domestic production basins.

This publicly traded limited partnership has core operations that include complimentary natural gas midstream, intrastate and interstate transportation and storage assets; crude oil, natural gas liquids (NGLs) and refined product transportation and terminaling assets; NGL fractionation; and various acquisition and marketing assets.

Through its ownership of Energy Transfer Operating, formerly known as Energy Transfer Partners, the company also owns Lake Charles LNG, as well as the general partner interests, the incentive distribution rights and 28.5 million common units of Sunoco, and the general partner interests and 39.7 million common units of USA Compression Partners.

Investors receive a 5.95% distribution. Credit Suisse’s Outperform rating comes with a $13 price target. The posted consensus target for Energy Transfer stock is $12.76, and the shares closed at $10.26 on Tuesday.

This is the largest publicly traded energy partnership and a leading North American provider of midstream energy services to producers and consumers. Enterprise Products Partners L.P. (NYSE: EPD) provides a wide variety of midstream energy services, including gathering, processing, transportation and storage of natural gas, natural gas liquids fractionation, import and export terminaling, and offshore production platform services.

One reason many analysts may have a liking for the stock might be its distribution coverage ratio. This ratio is well above 1 times, making it relatively less risky among the MLPs.

The company’s distributions have grown consistently over the years, and last year it announced that the board of directors of its general partner declared an increase in the quarterly cash distribution paid to partners to $0.45 per common unit, or $1.80 per unit on an annualized basis.

Enterprise Products Partners stock investors receive a 7.48% distribution. The analysts at Wells Fargo have an Overweight rating and recently raised the price target to $28. The consensus price target is right in line at $28.04. Shares closed Tuesday trading at $24.07 apiece.
[recirclink id=887391]

MPLX

This is the top holding for the Alerian MLP energy exchange-traded fund. MPLX L.P. (NYSE: MPLX) is primarily engaged in crude oil and refined products transportation and terminaling in the U.S. Midwest and Gulf Coast regions, as well as natural gas gathering and processing in the northeast from its prior acquisition of MarkWest Energy in 2015. MPLX was formed by independent U.S. refiner Marathon Petroleum.

The company reported solid first-quarter financial results, with $739 million in net income while adjusted EBITDA was $1.4 billion. The company generated $1.1 billion in net cash from operating activities. Its chief executive officer said at the time that the company is eyeing share buybacks, but those will depend on market conditions.

Investors receive an outstanding 9.46% distribution. Barclays has an Overweight rating on MPLX stock and recently raised the price target to $32 from $29. That compares with the lower $31.07 consensus target and Tuesday’s closing print of $29.04 a share.
[wallst_email_signup]
Two integrated supermajors and three top MLPs are all solid ideas for investors looking to have a position in the energy sector while generating consistent quarterly dividends. It is important to remember that MLP distributions could contain return of principal and that investors need to file a K-1 with their tax return.