Since the onset of the COVID-19 pandemic, oil prices have experienced dramatic fluctuations, underscoring the inherent volatility of the energy sector. However, certain key factors contribute to the relatively lower volatility of dividend-yielding stocks within this space. This dynamic positions companies such as Chevron Corporation CVX, Phillips 66 PSX and Exxon Mobil Corporation XOM for potential growth, prompting investors to monitor these stocks as they seek stability amid market uncertainty.
Turbulent Energy Market Landscape
Oil prices' behavior since the COVID-19 pandemic has provided a critical lesson for investors. In the early stages of the outbreak, marked by significant uncertainty and the absence of vaccines, oil prices experienced unprecedented volatility. West Texas Intermediate crude fell to an extraordinary low of negative $36.98 per barrel on April 20, 2020.
However, as vaccines were rapidly developed and global economies began to reopen, oil prices rebounded sharply, reaching $123.64 per barrel by March 8, 2022. Oil price data are per the U.S. Energy Information Administration. West Texas Intermediate crude has again currently crossed $75 per barrel.
Dividend Stocks to the Rescue
Overall, the oil pricing scenario appears daunting, which may discourage investors from allocating capital to energy companies. However, dividend-paying companies in the sector present a compelling investment opportunity. Firms with a stable dividend history tend to exhibit lower volatility than those without a track record. Companies committed to rewarding shareholders with consistent or growing dividends are likely to prioritize maintaining or increasing payouts, enhancing their appeal. This commitment to dividends often makes these stocks less sensitive to market fluctuations, providing a more stable investment option within the energy sector.
We have employed our Stock Screener to zero in on three such stocks. All the stocks carry a Zacks Rank #3 (Hold). With a dividend yield of more than 2%, all the companies have raised dividends in the past five years. With a payout ratio of less than 60%, the companies ensure sustainability with enough scope for future dividend increases. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
3 Stocks to Keep an Eye on: CVX, PSX, XOM
Chevron’s Dividend Yield More Impressive Than Industry
Chevron is a leading integrated energy company with a solid balance sheet to support future dividend increases. Over the past year, the energy giant has mostly been paying higher dividend yields than the composite stocks belonging to the industry. (Check Chevron’s dividend history here).
Chevron Corporation Dividend Yield (TTM)
Chevron Corporation dividend-yield-ttm | Chevron Corporation Quote
Phillips 66’s Diversified Business Model to Secure Dividends
Phillips 66 is a diversified energy manufacturing and logistic player with a presence in Midstream, Chemicals, Refining and Marketing and Specialties businesses. With a strong focus on disciplined capital allocation and maintaining financial strength, PSX is well-positioned to continue rewarding shareholders with dividend growth. Phillips 66 pays a quarterly cash dividend on the common stock of $1.15 ($4.60 annualized) per share. (Check Phillips 66’s dividend history here).
Phillips 66 Dividend Yield (TTM)
Phillips 66 dividend-yield-ttm | Phillips 66 Quote
ExxonMobil’s Proven Dividend Strength Over Decades
ExxonMobil is among the largest integrated energy companies in the world and has raised its dividend at an average annual growth rate of 5.8% in the past 41 years. The energy major can rely on its strong balance sheet to withstand any business turmoil and hence can support future dividend payments. (Check ExxonMobil’s dividend history here).
Exxon Mobil Corporation Dividend Yield (TTM)
Exxon Mobil Corporation dividend-yield-ttm | Exxon Mobil Corporation Quote
7 Best Stocks for the Next 30 Days
Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."
Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.7% per year. So be sure to give these hand picked 7 your immediate attention.
Chevron Corporation (CVX) : Free Stock Analysis Report
Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
Phillips 66 (PSX) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
