In this article we will take a look at top 10 energy dividend stocks to invest in. You can skip our analysis of the energy sector and go to Top 5 Energy Dividend Stocks to Invest In.
Energy stocks are having their day as oil prices on March 5 jumped to their highest levels in over a year after OPEC countries agreed not to increase oil supply in April and retain their wait-and-see mode as global economy slowly starts recovering. Major oil producer Saudi Arabia agreed to maintain its voluntary production cut through April. Goldman Sachs increased its Brent crude estimate to $75 per barrel in the second quarter and $80 for the third quarter, while UBS also upped its forecast to $75 a barrel for Brent and $72 for WTI in the second half of the year.
Should You Buy Energy Stocks in 2021?
Investing in the energy sector has become tricky following the rapidly changing trends. The world is moving away from carbon, and this transition is creating an anxiety among energy investors. The coronavirus crisis also exacerbated problems for the industry as oil and gas demand fell sharply all over the world. But the energy sector is evergreen for investment because human economic activity is reliant on the industry. As the world returns to normal following the availability of coronavirus vaccines and falling COVID-19 cases, energy stocks will rebound. For instance, according to a report by the U.S. Energy Information Administration, energy consumption in aviation would return to its pre-COVID levels by 2030.
Another concern in the market about the energy sector is the rising tide of green energy revolution. Major energy companies are already preparing for this inevitable change. Several oil and gas companies have launched billion-dollar funds to hasten their transition towards clean energy. For instance, Duke Energy set a goal to achieve net-zero carbon emissions by 2050. Similar goals were set by Exxon, Xcel, Southern Company and several other oil and gas companies. Earlier this year, Canadian green energy startup Eavor Technologies announced a $40 million led by BP Ventures and Chevron Technology Ventures.
Choosing the Best Energy Dividend Stocks
While choosing the best energy dividend stocks to invest in, we gave a preference to those energy companies which have consistently hiked their dividends over the last several years. Income investors should focus on dividend-paying companies’ track record instead of yields. If a company’s yield is extremely high, it shows it is not investing much in its future projects and focusing more on shareholder returns, which might be attractive only in the short term. On the other hand, companies which are increasing their dividend consistently for the last 5-15 years are expected to continue doing so. Investing in these companies for dividends would minimize uncertainty and ensure regular dividend checks.
Choosing top dividend companies that can ensure regular income has become more important after the COVID-19 crisis. Financial volatility is causing even the hedge funds to struggle maintaining their gains. The industry’s has already been tarnished in the last decade during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 88 percentage points since March 2017. Between March 2017 and February 5th 2021 our monthly newsletter’s stock picks returned 187.5%, vs. 75.8% for the SPY. Our stock picks outperformed the market by more than 111 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Top 10 Energy Dividend Stocks to Buy Now
Kanok Sulaiman/Shutterstock.com With this industry outlook in mind, let's start our list of top 10 energy dividend stocks to invest in.
No. of Hedge Fund Holders: 13Dividend Yield: 3.68%
National Fuel Gas Company offers various services in the energy sector, including exploration, production, pipeline and storage. In the most recent quarter, the company’s adjusted EPS came in at $1.06, beating the Street’s estimates by $0.02. The stock is up about 25% over the last 12 months. The energy company has paid dividends for 118 consecutive years and has increased its annual dividend for 50 consecutive years.
According to our database, the number of NFG’s long hedge funds positions decreased at the end of the fourth quarter of 2020. 13 hedge funds hold a position in National Fuel Gas by the end of December, compared to the 16 funds in the third quarter. The company’s biggest stakeholder is Mario Gabelli's GAMCO Investors with 1.4 million shares worth $57.3 million.
No. of Hedge Fund Holders: 13Dividend Yield: 10.94%
MPLX is one of the top 10 energy dividend stocks to invest in. The company has a network of crude oil and refined product pipelines, light-product terminals, gas processing plants and fractionation facilities. With about 10% dividend yield, MPLX is an attractive dividend stock in the energy sector. The company in February said it plans to use excess cash to buy back shares as it believes its stock is undervalued.
As of the end of the fourth quarter, 13 hedge funds in Insider Monkey’s database of 887 funds held stakes in MPLX LP, compared to 14 funds in the third quarter. Zimmer Partners is the company’s biggest stakeholder, with 2.8 million shares worth $60.2 million.
No. of Hedge Fund Holders: 22Dividend Yield: 7.85%
OneOK is a Tulsa, Oklahoma-based gas company which owns major natural gas liquids systems. In the fourth quarter, the company’s adjusted EBITDA jumped 12% but missed the Street’s forecasts. For FY 2021, the company expects EPS in the range of $2.40-$3.08, below the consensus of $3.
According to our database, 22 hedge fund hold an OKE position as of the end of the fourth quarter. The company’s most significant stakeholder is Two Sigma Advisors, with 627,200 shares worth $24 million.
No. of Hedge Fund Holders: 22Dividend Yield: 9.24%
With a 9% dividend yield, Magellan Midstream Partners is one of the top energy dividend stocks to invest in. The company owns ammonia and petroleum pipelines, over 80 petroleum products terminals, refined and crude oil pipelines. The company’s Q4 results were better than expected but the stock slipped on the 25% year-over-year decline in distributable cash flow.
With a $72.9 million stake in Magellan Midstream Partners, 683 Capital Partners owns 1.7 million shares of the company as of the end of the fourth quarter of 2020. Our database shows that 22 hedge funds held stakes in MMP at the end of the fourth quarter, versus 20 funds at the end of the third quarter.
No. of Hedge Fund Holders: 26Dividend Yield: 4.26%
Philips 66 is one of the top 10 energy dividend stocks to invest in. The company was formed after a spin-off from ConocoPhillips. In February, the company declared a dividend of $0.90 per share. Its forward yield is 4.83%. The company posted a wide-than-expected loss for the fourth quarter due to weak demand and COVID-19 impact.
There were 26 hedge funds in our database that held stakes in Phillips 66, compared to 27 funds in the third quarter. East Side Capital is the biggest stakeholder in the company.
