The energy sector is known for its unpredictability. For instance, this year’s crude oil prices have fluctuated significantly, with West Texas Intermediate, the main U.S. benchmark, ranging from $80 to $55 per barrel. Such volatility complicates making confident investment decisions within the energy market.
Nevertheless, several energy stocks have garnered attention from our Fool.com contributors this month, highlighting three companies to consider for purchase: Enterprise Products Partners (EPD 1.22%), Oneok (OKE 0.63%), and ExxonMobil (XOM 2.42%). Here’s why these stocks merit your attention this June.
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Enterprise Products Partners: Stability Over Excitement
Reuben Gregg Brewer (Enterprise Products Partners): In the world of income investing, consistency is vital. The ultimate goal is to receive regular dividend payments, where smaller, reliable increments are often preferable to larger, riskier increases. Enterprise Products Partners excels in this area.
This company has raised its distribution for 26 consecutive years, with recent increases in the mid-single digits, surpassing inflation but remaining sustainable. A strong distributable cash flow, which covered the distribution by 1.7 times in 2024, supports this. Moreover, with an investment-grade balance sheet, Enterprise provides a solid foundation for future distributions.
A Model of Sustainable Growth
A sustainable growth leader (Oneok): The energy industry is frequently tumultuous, with commodity prices often swinging dramatically. This volatility can hinder consistent growth and stable dividends for many energy companies.
However, Oneok stands out in this respect, having maintained over 25 years of stable and growing dividends. While it may not raise its payment every single year, it has nearly doubled its dividend over the last decade, significantly outpacing its peers in the pipeline sector.
Oneok’s robust growth can be attributed to its capability to enhance earnings throughout varying commodity price cycles, achieving an impressive 16% annual growth rate in EBITDA over the past 11 years. The company upholds a strong financial profile, with a solid balance sheet and a conservative leverage ratio of 3.5, enabling ongoing investments in expansion initiatives.
A Strong Oil Dividend Stock
Neha Chamaria (ExxonMobil): As a prominent player in oil and gas production, ExxonMobil might bring investor apprehension during uncertain times. Nevertheless, this well-capitalized company is one to consider purchasing, especially during downturns, due to its solid dividend track record.
Since 2019, ExxonMobil’s cash flows have increased, thanks to efforts to enhance production efficiency and reduce costs. In 2024, it projected $55 billion in cash flow from operations, driven by record production levels. ExxonMobil anticipates ongoing growth with upcoming projects expected to yield substantial earnings and cash flow, contributing to its long-standing commitment to dividends and enhancing total returns for shareholders.
