Oil is trading at the highest level in over a decade, and there is every reason to believe that the price of the black gold may stay above $100 a barrel for some time. Warren Buffett thinks so, as he has been loading up Berkshire Hathaway with some massive new buys at what some thought were reasonably high prices.
The bottom line for investors is that between the issues related to the Russia-Ukraine war, the policies of the Biden administration and a lack of exploration during the COVID-19 pandemic, the table was set for higher prices, and it may stay that way.
We screened our 24/7 Wall St. energy research universe looking for the stocks within the sector that are Buy rated and pay among the highest dividends. We included exploration and production companies, natural gas leaders, energy master limited partnerships (MLPs) and refiners. Seven top companies hit our screens. While all are rated Buy, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Devon Energy
This may one of the best value propositions in the sector, as it uses the variable dividend strategy. Devon Energy Corp. (NYSE: DVN) is an independent energy company that primarily engages in the exploration, development and production of oil, natural gas and natural gas liquids (NGLs) in the United States and Canada. It operates approximately 19,000 wells.
The company also offers midstream energy services, including gathering, transmission, processing, fractionation and marketing to producers of natural gas, NGLs, crude oil and condensate through its natural gas pipelines, plants and treatment facilities.
Production is weighted toward crude oil while growth opportunities are liquids focused, anchored by the Delaware Basin, SCOOP/STACK, Eagle Ford Shale, Canadian Oil Sands, and the Barnett. Devon also owns equity in the publicly traded midstream MLP EnLink.
Shareholders now receive a 7.16% dividend. Truist Financial has a $100 target price on Devon Energy stock. The consensus target is $76.18, and shares closed on Monday at $70.99.
Enterprise Products Partners
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, NGLs 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.
Enterprise Products Partners stock investors receive a 7.03% distribution. The Goldman Sachs price target is $30, in line with the $30.71 consensus target. Shares closed at $26.46 on Monday.
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.
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