Investors love dividend stocks, especially the high-yield variety, because they offer a significant income stream and have massive total return potential. Total return includes interest, capital gains, dividends, and distributions realized over time. In other words, the total return on an investment or a portfolio consists of income and stock appreciation. For example, if you buy a stock at $20 that pays a 3% dividend and rises to $22 in a year, your total return is 13%. That is, 10% for the increase in stock price and 3% for the dividends paid.

In 2025, we may see a 10% to 15% market correction after two years of 20% gains for the S&P 500. Large-cap integrated oil giants are trading at some of the cheapest levels in years, offering dependable and rising dividends. If readers have made significant gains in the Magnificent 7 stocks, it may make sense to peel some off and look at the top energy companies.

Why do we cover large-cap energy dividend stocks?

Energy dividend stocks provide investors with reliable streams of passive income. Passive income is characterized by its ability to generate revenue without requiring the earner’s continuous active effort, making it a desirable financial strategy for those seeking to diversify their income streams or achieve financial independence.

BP

This company is a premier European integrated oil giant, paying shareholders a hefty 5.58% divided. BP PLC (NYSE: BP) engages in the energy business worldwide.

It operates through these segments:

• Gas & Low Carbon Energy
• Oil Production & Operations
• Customers & Products
• Rosneft

BP produces and trades natural gas, offers biofuels, operates onshore and offshore wind 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; refining, supply, and trading of oil products; and operation of electric vehicle charging facilities.

In addition, it produces and refines oil and gas and invests in upstream, downstream, and alternative energy companies, advanced mobility, bio and low-carbon products, carbon management, digital transformation, and power and storage areas.

Raymond James has an Outperform rating on the shares and a $37 target price.

Chevron

This integrated giant is safer for investors looking to position themselves in the energy sector and pays a hefty 4.35% dividend. Chevron Corp. (NYSE: CVX) engages in integrated energy and chemicals operations worldwide through its subsidiaries. It operates in two segments.

The Upstream segment is involved in the following:

• Exploration, development, production, and transportation of crude oil and natural gas
• Processing, liquefaction, transportation, and regasification associated with liquefied natural gas
• Transportation of crude oil through pipelines; and transportation, storage
• Marketing of natural gas, as well as operating a gas-to-liquids plant

The Downstream segment engages in:

• Refining crude oil into petroleum products
• Marketing crude oil, refined products, and lubricants
• Manufacturing and marketing renewable fuels
• Transporting crude oil and refined products by pipeline, marine vessel, motor equipment, and rail car
• Manufacturing and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant additives

It also involves cash management, debt financing, insurance operations, real estate, and technology businesses.

Chevron announced in late 2023 that it has entered into a definitive agreement with Hess Corp. (NYSE: HES) to acquire all of the outstanding shares of Hess in an all-stock transaction valued at $53 billion, or $171 per share based on Chevron’s closing price on October 20, 2023. Under the terms of the agreement, Hess shareholders will receive 1.0250 shares of Chevron for each Hess share. The transaction’s total enterprise value, including debt, is $60 billion. The Federal Trade Commission approved the deal in October, and it should close soon.

Jefferies has set its price objective at $197.

Exxon Mobil

The recent slow but steady increase in oil prices offers investors an excellent entry point, and they will gladly grab a strong 3.61% dividend. Exxon Mobil Corp. (NYSE: XOM) is the world’s largest international integrated oil and gas company, exploring for and producing crude oil and natural gas in:

• The United States
• Canada
• South America
• Europe
• Africa
• Asia
• Australia/Oceania

Exxon also manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and specialty products, and transports and sells crude oil, natural gas, and petroleum products.

Top Wall Street analysts expect Exxon to remain a key beneficiary in a higher oil price environment, and most remain very optimistic about the company’s sharp positive inflection in capital allocation strategy, upstream portfolio, and leverage to further demand recovery. In addition, Exxon offers greater Downstream/Chemicals exposure than its peers.

Exxon has completed its purchase of oil shale giant Pioneer Natural Resources in a $59.5 billion all-stock purchase. The deal created the largest U.S. oilfield producer and guaranteed a decade of low-cost production.

Wells Fargo analysts have an Overweight rating and a $135 price target for the shares.

Shell

This foreign energy giant offers investors a hefty 4.13% dividend and big upside potential. Shell PLC (NYSE: SHEL) is an energy and petrochemical company in Europe, Asia, Oceania, Africa, the United States, and the Rest of the Americas.

The company operates through six segments:

• Integrated Gas
• Upstream
• Marketing
• Chemicals and Products
• Renewables
• Energy Solutions

It explores for and extracts crude oil, natural gas, and natural gas liquids; markets and transports oil and gas; produces gas-to-liquids fuels and other products; and operates upstream and midstream infrastructure to deliver gas to market.

The company also markets and trades natural gas, liquefied natural gas (LNG), crude oil, electricity, and carbon-emission rights; and markets and sells LNG as a fuel for heavy-duty vehicles.

In addition, it trades in and refines crude oil and other feedstocks, such as:

• Low-carbon fuels
• Lubricants
• Bitumen
• Sulphur
• Gasoline
• Diesel
• Aviation and marine fuel

It also produces and sells petrochemicals for industrial use and manages oil sands activities.

Further, the company produces base chemicals comprising ethylene, propylene, aromatics, and intermediate chemicals, such as styrene monomer, propylene oxide, solvents, detergent alcohols, ethylene oxide, and ethylene glycol.

Shell generates electricity through wind and solar resources, produces and sells hydrogen, and provides electric vehicle charging services.

Wells Fargo has an Overweight rating and has set a $82 price target.

Two Blue Chip Dividend Giants Make Up Almost 40% of Warren Buffett’s Portfolio

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