The world continues to use more energy and may continue to do so for the foreseeable future. According to McKinsey & Company's 2024 Global Energy Perspective, worldwide energy demand could grow until 2050. While the United States and other developed countries have become more energy efficient, the growth in emerging markets is more than offsetting that.
Energy will remain the foundation for the global economy, making energy stocks a no-brainer for almost any long-term investor -- especially those who like dividends.
Admittedly, the conversation about how the world will meet its energy needs is more complex. Renewable energy sources, like solar and wind power, will probably become increasingly important to the world's energy future. This trend has been ongoing and is poised to continue as countries work to mitigate carbon emissions.
Here are three energy stocks you can buy and hold forever. They've shown they can navigate a changing world and have the leadership and trend exposure needed to continue delivering growth and dividends. You can own all three for under $500, making them accessible to most individual investors.
Here is what you need to know.
Two integrated oil and gas stocks investors can count on for the foreseeable future
Some oil and gas companies explore and extract resources from the ground, while others refine oil and gas into products and sell them. However, companies like ExxonMobil(NYSE: XOM) and Chevron Corporation(NYSE: CVX) do it all. They are among the world's largest oil and gas companies, diverse businesses participating in almost every aspect of supplying fossil fuel products to the economy.
The advantage of this is that they tend to be more dependable. For example, a pure oil and gas exploration company is highly vulnerable to commodity prices. If oil prices plunge, so do profits. Meanwhile, when commodity prices fall, an oil refinery could make more money because its costs decrease. ExxonMobil and Chevron do both. They aren't as volatile as more specialized companies. That might mean less upside during good times but less downside when things go the other way.
Both companies' size and diversity have enabled them to pay and raise their dividends. ExxonMobil and Chevron have raised their dividends for 42 consecutive years and 37 consecutive years, respectively.
ExxonMobil and Chevron also have global footprints, spanning almost every continent. Owning both stocks exposes investors to a diverse portfolio of resource-rich regions.
The McKinsey report estimates fossil fuel demand will plateau for a while, potentially through the 2030s, before eventually declining. Even then, it's highly unlikely fossil fuels will collapse. Even the most aggressive forecasts for renewable energy growth still call for fossil fuels to contribute 39% of global power generation by 2050.
In other words, ExxonMobil and Chevron will remain relevant for the foreseeable future and, at worst, have years to evolve if necessary. That doesn't factor in industry consolidation, either. ExxonMobil recently acquired Pioneer Natural Resources, and Chevron is working on acquiring Hess. Until then, ExxonMobil (3.7% yield) and Chevron (4.4% yield) offer generous dividends that could still have decades of life.
Renewable energy trends make this stock a must-have
None of that changes the fact that renewable energy is growing. The McKinsey report anticipates wind and solar will satisfy the bulk of incremental energy demand over the coming decades and increase their share of the grid over time.
Not to oversimplify things, but that makes NextEra Energy(NYSE: NEE) a probable winner. NextEra is a diversified energy company. Headquartered in Florida, it operates Florida Power & Light, America's largest electric utility. Its power-generation unit is the world's largest energy producer from wind and solar.
NextEra's management estimates that U.S. power consumption will increase by approximately 55% from 2020 to 2040. The company added approximately 12 gigawatts of generation and storage capacity in 2024 and still has a 25 gigawatt backlog. The company has grown earnings at an annualized rate of 10% over the past decade and is guiding for 6% to 8% annualized adjusted earnings growth through 2027.
That should continue fueling dividend increases. NextEra yields 3% at its current share price and has raised the dividend for 30 consecutive years. That initial yield isn't as high as you'll get from ExxonMobil or Chevron, but the dividend will probably grow more quickly over time.
Given the anticipated continued growth in renewable energy, NextEra's growth seems unlikely to drop off anytime soon. Investors can reasonably expect the business to grow faster than inflation for the foreseeable future, making it a no-brainer dividend stock and the perfect complement to holding ExxonMobil and Chevron.
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Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chevron and NextEra Energy. The Motley Fool has a disclosure policy.
