In this article, we discuss 12 best energy dividend stocks to buy now. You can skip our detailed analysis of the energy sector and the performance of dividend stocks over the years, and go directly to read 5 Best Energy Dividend Stocks To Buy Now.
As 2023 draws to a close, experts are evaluating how different industries have fared this year compared to the previous one. Various sectors experienced contrasting outcomes, influenced by ongoing political and economic factors. The energy sector in the US maintained stability throughout 2022, largely attributed to elevated prices and limited supplies. Closing the year with remarkable growth, it surged by 58% by December 30, a stark contrast to the S&P 500's approximately 20% decline. Notably, according to Dow Jones Market Data, this marked the first instance of the energy sector standing out as the sole victor in the S&P 500 annual performance, and it was the only sector that didn't witness a decline throughout the year. This year, the situation has reversed, as energy stocks are now trailing behind the overall market performance. The S&P 500 Energy is down by 7.31% in 2023 so far, compared with a 20.40% gain of the S&P 500.
In addition to this, the largest American exchange-traded fund (ETF) that follows clean energy stocks was set to mark its highest yearly outflows ever due to several factors. Rapidly increasing interest rates, rising prices of raw materials, and disruptions in the supply chain have diminished the appeal of this fund for investors. As per Lipper data, the iShares Global Clean Energy ETF has recorded more than $1 billion in net outflows as of November 2023. This ETF, which was once favored during the pandemic, had experienced substantial net inflows of over $2 billion annually in both 2020 and 2021. However, investors have been pulling out of this ETF amid the escalation of interest rates. Moreover, more investors are heavily invested in technology stocks compared to energy stocks than they have been since September 2021, according to a Bank of America survey. The report mentioned that the managers have allocated the least amount of money to energy shares since December 2020.
Despite a recent slowdown, energy stocks have proven advantageous for investors over the past three years, soaring by more than 200%. This growth aligned with the rise in oil prices from their low points over multiple years. These years serve as a valuable lesson for investors, illustrating the correlation between energy stock performance and substantial fluctuations in oil prices. Moreover, the energy sector has changed notably, with many companies allocating more funds to dividends for investors while cutting back on new drilling. This shift has reshaped how energy investments work, underscoring these companies' evolving strategies focused on boosting returns for shareholders.
Analysts are also positive about the sector’s outlook. Todd Sohn, a managing director in ETF and technical strategy, mentioned in an interview that there's a slight improvement in energy's performance despite the outflows. This doesn't stand as a clear signal on its own, but it hints at a positive change in sentiment. He suggests that this situation could now be seen as an opportunity for a contrarian move. Investors are attracted to energy companies because their stock prices are relatively low compared to some of the major technology stocks that drove the market's growth this year. They're seeking to expand their investments beyond the dominant tech stocks and see potential in the energy sector.
Another reason for investors’ inclination toward energy stocks is their commitment to shareholder return. Over the years, energy companies have maintained a practice of sharing profits with shareholders in the form of dividends, making their stocks attractive for income-focused investors. Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and ConocoPhillips (NYSE:COP) are some of the best dividend stocks from the energy sector. We will further discuss dividend stocks from the industry in this article.
12 Best Energy Dividend Stocks To Buy Now
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Our Methodology:
For this list, we first scanned Insider Monkey's database of 910 hedge funds, as of the third quarter of 2023. Our focus was on selecting energy companies across various sectors within the energy industry, including exploration and production, utilities, renewable energy, and oil refining and marketing. From this pool of companies, we identified 12 companies that prioritize distributing dividends to their shareholders and ranked them in ascending order of the number of hedge funds having stakes in them at the end of Q3 2023.
Valero Energy Corporation (NYSE:VLO) is a multinational company primarily engaged in the refining and marketing of petroleum products. On November 7, the company declared a quarterly dividend of $1.02 per share, which was consistent with its previous dividend. Though the company does not hold any dividend growth streak, it has been making regular dividend payments to shareholders since 1997, which makes VLO one of the best dividend stocks on our list. As of December 11, the stock has a dividend yield of 3.32%.
The number of hedge funds in Insider Monkey's database reported having stakes in Valero Energy Corporation (NYSE:VLO) stood at 44 in Q3 2023, as compared to 49 in the preceding quarter. The overall value of these stakes is nearly $903 million. With over 2 million shares, AQR Capital Management was the company's leading stakeholder in Q3.
Marathon Oil Corporation (NYSE:MRO) is a Texas-based petroleum refinery company primarily engaged in the exploration, production, and marketing of crude oil and natural gas. Their operations involve locating, extracting, and refining these resources, primarily in the US. On October 25, the company announced a 10% hike in its quarterly dividend to $0.11 per share. The stock has a dividend yield of 1.83%, as of December 11.
In the third quarter of 2023, Marathon Oil Corporation (NYSE:MRO) reported revenue of $1.8 billion, which beat analysts' estimates by $50 million. The company's operating cash flow for the quarter came in at $1.04 billion and its adjusted free cash flow was $718 million. During the quarter, the company returned $61 million in base dividends to shareholders, which places MRO one of the best dividend stocks on our list.
At the end of Q3 2023, 45 hedge funds in Insider Monkey's database reported having stakes in Marathon Oil Corporation (NYSE:MRO), up from 43 in the previous quarter. The collective value of these stakes is over $956.6 million.
EQT Corporation (NYSE:EQT) operates in the upstream sector of the energy industry, specializing in natural gas exploration and production from shale formations. The company currently pays a quarterly dividend of $0.1575 per share, having raised it by 5% in October this year. This marks a cumulative growth of over 25% in the regular dividend since its inception in late 2021, which makes EQT one of the best dividend stocks on our list. The stock's dividend yield of 1.70%, as of December 11.
As of the close of Q3 2023, 45 hedge funds tracked by Insider Monkey owned stakes in EQT Corporation (NYSE:EQT), compared with 51 in the preceding quarter. The consolidated value of these stakes is more than $1.44 billion. With roughly 6 million shares, Citadel Investment Group was the company's leading stakeholder in Q3.
Constellation Energy Corporation (NASDAQ:CEG) is a Maryland-based energy company that operates in various segments of the energy market, including power generation, energy trading, and selling electricity and natural gas to customers in regulated and competitive markets. The company started paying dividends in 2022 and has raised its payouts once since then. It currently offers a quarterly dividend of $0.282 per share and has a dividend yield of 1.01%, as of December 11.
Constellation Energy Corporation (NASDAQ:CEG) was a part of 45 hedge fund portfolios at the end of Q3 2023, as per Insider Monkey's database. The stakes owned by these hedge funds have a total value of more than $1.5 billion. Among these hedge funds, Orbis Investment Management was the company's largest stakeholder in Q3.
Marathon Petroleum Corporation (NYSE:MPC) is an American corporation that operates as an integrated energy company. Its primary focus is on refining, marketing, and transporting petroleum products. On October 25, the company declared a 10% hike in its quarterly dividend to $0.825 per share. This marked the company's second consecutive year of dividend growth. With a dividend yield of 2.30%, as of December 11, MPC is one of the best dividend stocks on our list.
Insider Monkey's database of Q3 2023 indicated that 48 hedge funds owned stakes in Marathon Petroleum Corporation (NYSE:MPC), growing from 42 in the previous quarter. The consolidated value of these stakes is over $2.7 billion. Elliott Management is the largest stakeholder of the company in Q3.
Devon Energy Corporation (NYSE:DVN) operates as an independent energy company primarily engaged in the exploration, development, and production of oil, natural gas, and natural gas liquids. The company's current quarterly dividend comes in at $0.77 per share and has a dividend yield of 9.53%, as of December 11.
At the end of September 2023, 52 hedge funds tracked by Insider Monkey owned stakes in Devon Energy Corporation (NYSE:DVN), up from 45 in the preceding quarter. These stakes are collectively valued at $863.6 million.
Hess Corporation (NYSE:HES) is a New York-based integrated energy company involved in various aspects of the oil and gas industry. On December 6, the company announced a quarterly dividend of $0.4375 per share, which was in line with its previous dividend. It has raised its dividends for two years in a row, which makes HES one of the best dividend stocks on our list. As of December 11, the stock has a dividend yield of 1.30%.
As of the end of the third quarter of 2023, 58 hedge funds owned stakes in Hess Corporation (NYSE:HES), up from 52 in the previous quarter, as per Insider Monkey's database. The consolidated value of these stakes is over $1.26 billion.
