Home Stock list Get Paid While You Wait: 3 Highest Dividing Stocks in Energy

Get Paid While You Wait: 3 Highest Dividing Stocks in Energy


The energy sector is in disgrace, at least in part because of the drive to reduce the amount of carbon generated by humans. The point is, phasing out oil and natural gas is going to take decades, even by some of the most ambitious projections in existence today. This gives contrarian investors plenty of time to invest in the sector – and, if they pick the right energy names, their investments could end up turning to clean energy and paying off well over time. along the process. Here are three high-dividend energy stocks to watch today as they begin to change with the world around them.

1. The toll

Basically, Canada Enbridge (NYSE: ENB) is a pretty boring business, which charges a fee for using the intermediate assets it owns. This should be desirable enough for income-oriented investors, as it avoids the ups and downs inherent on the commodity side of the energy space.

Enbridge is one of the largest mid-market companies in North America. Its yield is 6.7% and the dividend has been increased for over 25 consecutive years which places it in the land of Dividend Aristocrat. Add a quality balance sheet and even conservative investors should like what they see.

Image source: Getty Images.

But probably the most interesting thing here is the fact that Enbridge derives 3% of its EBITDA from renewable energy assets. To be fair, 3% is a small number, but the company has a collection of offshore wind projects underway that will increase the size of this business. It’s only one part of Enbridge’s overall growth plan, but it means the company sees the future and adapts now.

With decades before the midsize giant expects demand for oil and gas to become a problem, it has plenty of time to clean up its carbon footprint. In the meantime, you can reap big dividends from the cash cow pipeline business as it adapts to a changing world.

2. Same direction, more volatility

from France TotalEnergies (NYSE: TTE) is similar, but different. Like Enbridge, this energy industry giant sees clean energy written on the wall and begins to adapt for the future. However, it is much more exposed to commodity prices as it is an integrated oil and gas company. This may be more than some investors want to assume, given the inherent volatility at this end of the energy sector. But upstream heavyweight TotalEnergies not only managed to weather the 2020 energy slowdown without dividend cuts, but it was also the only major oil company to expressly state that it would support its dividend as long as oil averaged around of $ 40 per barrel. None of his peers made such a commitment. TotalEnergies obviously knows how important dividends are for its shareholders. The efficiency is now around 7%, the highest in the integrated major space.

The caveat is that TotalEnergies’ dividend is not likely to rise from here, so a 7% return is basically all you should expect on the dividend front. The rest of its cash is likely to be spent on debt reduction efforts and investments for the future. However, this is the really interesting thing, as the company’s spending plans include huge help with clean energy investments. In fact, he wants to triple the size of this company by 2030 (from 2019 levels).

It is important to note that TotalEnergies is not a new player in the field of clean energies, it has been investing in the sector for years. So there is really no reason to doubt his ability to achieve his goals. If you like big returns and are ready to invest in an unappreciated name, this integrated, high-yielding giant should be on your wishlist.

TTE Dividend Yield Chart
Data by YCharts.

3. A very different decision

Clean energy is also on the minds of the management team at Royal Dutch Shell (NYSE: RDS.B). The goal is roughly similar to what the other two names are doing here – namely, using oil and gas related companies to help finance the expansion of a renewable energy operation. This is the good news.

The bad news is that Shell, unlike Enbridge and TotalEnergies, decided to press the reset button hard when it started moving more publicly towards clean energy. In fact, he reduced the dividend by 66%. The around 3.8% dividend yield it is now offering is near the low end of the integrated oil peer group.

But don’t take Shell off the list just yet. Focusing more on clean energy was a key part of its redesign. But so was the goal of returning to dividend growth, with the intention of rewarding investors as he changed his business model. So far, the dividend has been increased three times since it was cut, proving that Shell was serious about increasing the dividend again. And for investors looking for dividend growth stock in the evolving energy sector, this could be an attractive option.

It is to highlight that ExxonMobil and Chevron both have decades of dividend increases under their belt, which is way better than the streak of increases Shell has racked up since its cut (which only lasts two years, if you include 2021 as a full year). However, Shell has taken a much more aggressive stance on the clean energy front. For investors looking to distinguish between old and new sources of energy, this could easily give Shell the dividend growth advantage.

Out of phase

Major changes are emerging in the energy sector, with clean energy clearly being bottom-up technology. But that doesn’t mean that there aren’t opportunities to invest in older energy sources while making a lot of money. And if dividends are your thing, then Enbridge, TotalEnergies and Shell are all worth a closer look. Shell is a bit of an odd man in this trio given its dividend cut, but if your focus is more on dividend growth than yield, it’s still worth a close look.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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