If there’s one thing investors can expect when investing their money in the energy sector, it’s volatility. Oil and natural gas, as commodities, have a long history of rapid and often dramatic price movements.
For this reason, investors looking at this sector should consider sticking to the biggest and best companies, which generally means integrated energy giants like Chevron (NYSE: CFX) and Total energies (NYSE: T). That’s why these two stocks stand out today for investors looking for high returns.
There are companies that have longer streaks of annual dividend increases, but you have to give credit where it’s due. Chevron’s 37th consecutive annual dividend increase is impressive, given the highly volatile nature of the industry in which it operates. Stocks can be obtained for less than $500 apiece, and Dividend yield That’s a very respectable 4.1%. For comparison, Standard & Poor’s 500 It yields just 1.2%, and the average energy stock yields just 3.1%.
Supporting this above average return is Energy company With a widely diversified portfolio, spanning the upstream (energy production), midstream (pipelines), and downstream (chemicals and refining) sectors of the industry. Moreover, its portfolio of assets is spread across the world.
Together, this diversification helps smooth out the peaks and valleys that energy prices experience on a regular basis. Chevron also has one of the strongest balance sheets, with a debt-to-equity ratio of 0.17 times. This would be low for any company, but more importantly it gives management room to leverage leverage to finance the business (and profits) during downturns in the energy industry.
Chevron is not firing on all cylinders right now. It is having trouble closing its acquisition Hesswhich has business relationships with some of Chevron’s major competitors. While production rose 7% year-on-year in the third quarter of 2024, return on capital employed (a key industry performance measure) fell slightly, and lower energy prices squeezed top and bottom lines.
But that’s just par for the course in the energy industry, with Chevron adding a little leverage so it can keep business as usual. If history is any guide, Chevron will weather the turmoil it faces, continue to reward investors with increasing profits, and expand its business over time.
If you’re looking for a high-yielding energy stock that can weather the sector’s ups and downs, Chevron is likely one of the best options out there. But what if you look to the future and believe that clean energy will play an increasingly important role in the global energy market? Chevron isn’t investing that much in this area, so it may not be for you.
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