Key Highlights
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ConocoPhillips anticipates an increase of $6 billion in annual free cash flow by the year 2029.
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Oneok expects to achieve merger synergies and organic growth projects, leading to a steadily increasing dividend.
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NextEra Energy forecasts a compound annual growth rate of over 8% in earnings over the next decade.
- Explore 10 stocks that we believe outperform ConocoPhillips ›
The energy sector has experienced a relatively subdued year, with the average energy stock in the S&P 500 showing only a 4% increase, in contrast to nearly 18% for the overall market. The decline in oil prices has contributed to the underwhelming performance in this sector.
Even though energy stocks have underperformed recently, the energy sector remains a crucial component in driving the economy. Below are three top energy stocks to consider for capitalizing on the anticipated growth in energy demand.
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ConocoPhillips
ConocoPhillips (NYSE: COP) stands as a prominent player in oil and gas production. The company maintains one of the most diverse and cost-effective portfolios in the industry. Currently, it requires an average oil price in the mid-$40s to uphold its capital expenditure and about $10 more per barrel to sustain its dividend. With crude oil prices currently in the low $60s, ConocoPhillips is generating substantial free cash flow.
The company projects a decline in its breakeven level over the coming years as it leverages more cost savings from last year’s merger with Marathon Oil. It also aims to complete three major liquefied natural gas projects and the Willow oil project in Alaska by the end of the decade, potentially contributing an additional $6 billion in annual free cash flow by 2029. This would be a significant uptick for a company that recorded $6.1 billion in free cash flow during the first three quarters of this year.
Oneok
Oneok (NYSE: OKE) is among the largest midstream energy companies in the U.S., generating stable cash flow backed by long-term contracts and regulated rates. This solid cash flow supports its attractive dividend, currently yielding 5.6%.
In recent years, Oneok has strategically expanded its midstream platform through acquisitions, including the transformative purchase of Magellan Midstream Partners in 2023. This move has allowed Oneok to delve into crude oil and refined petroleum infrastructure. The company anticipates significant cost savings and synergies from these acquisitions and has several expansion projects underway, including the Texas City Logistics Export Terminal and the Eiger Express Pipeline, expected to be operational by mid-2028, positioning Oneok for steady dividend growth.
NextEra Energy
NextEra Energy (NYSE: NEE) is a premier electric utility and energy infrastructure development firm. Its Florida-based utility produces steadily increasing, rate-regulated earnings, while its energy resources arm generates income supported by long-term contracts and regulated rates. This cash flow sustains an attractive 2.8% dividend yield.
To cater to rising power demand, NextEra plans significant investments, exceeding $100 billion by 2032 in Florida alone. Further, its energy resources division is investing heavily in electricity transmission, gas pipelines, and clean energy projects. This expansive investment is forecasted to enable over 8% compound annual growth in earnings per share over the next ten years.
Top Energy Stocks to Watch
ConocoPhillips, Oneok, and NextEra Energy all have promising growth trajectories ahead. Consequently, these companies are well-positioned to continue raising their dividends, making them strong candidates for investors seeking income and growth, potentially driving significant total returns in the years to come.
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Matt DiLallo holds positions in ConocoPhillips and NextEra Energy and has options for January 2026 of $65 puts on Oneok. The Motley Fool has investments in and recommends NextEra Energy. Additionally, the Motley Fool recommends ConocoPhillips and Oneok, adhering to a disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
