Energy stocks are the only sector of the S&P 500 to have outperformed last year. Their 59% gain helped the index finish the year in positive territory.
Investing in the right energy stocks can help you boost your overall returns while also offering some protection from economic downturns. Read on to learn more about some of the top performers in this sector.
Brookfield Renewable Energy
Investing in energy stocks has been a great way to make money in recent years, thanks to the rapid growth in clean energy demand. This trend is likely to continue for the foreseeable future, as governments are committed to curbing global warming.
In the meantime, green energy companies are benefitting from rising prices and falling costs, as well as an increasing number of tax credits. These incentives are expected to spur investment in clean energy projects, which could fuel more growth for the industry as a whole.
But that doesn’t mean green energy stocks are without their risks. They’re often subject to regulatory changes and political uncertainty, especially in emerging markets. For example, Brookfield Renewable Energy (BEP) operates in the United States, Brazil, and Colombia, where there are potential regulatory or political challenges that could affect its growth ambitions.
It’s also worth remembering that green energy stocks are subject to volatility in their pricing, particularly when market conditions change rapidly. This is why it’s important to carefully evaluate each company before investing in it.
One of the best high-yield stocks to own right now is Brookfield Renewable Energy. It offers a mouth-watering yield of 7.5%, an eye-popping track record, and a business model that’s recession-proof.
The biggest reason why I like BEP is its amazing long-term growth potential. In fact, I think BEP’s stock price is currently temporarily undervalued. That’s because I think the stock is not priced in to the long-term growth runway from the global energy transition and the probability of lower interest rates in the near future.
BEP’s distribution is also incredibly safe, as it’s highly diversified across the globe with 92% of its cash flow coming from contracts with large regulated utilities. In addition, BEP’s debt is highly de-risked thanks to its asset level debt and a smart two-year hedge against currency risk.
The bottom line is that BEP is a fantastic high-yield blue-chip stock to buy today, and I strongly recommend it to investors. Its dividend is backed by rock-solid cash flow and a strong payout ratio, which combined with its valuation boost should help its yield to grow over the long run.
ConocoPhillips
ConocoPhillips is an independent exploration and production company that produces, explores for and transports oil & gas globally. It primarily operates in Alaska, Lower 48, Canada and Europe & Asia Pacific.
It is a major producer of crude oil, natural gas, liquefied natural gas (LNG) and other petroleum products. It also produces chemicals and plastics.
The company’s diversified portfolio of business operations enables it to earn profits from different regions of the world. Its core assets include deepwater and conventional oil and gas exploration and development, reservoir management and exploitation, 3-D seismic, petroleum coke upgrading and sulfur removal. It also operates a number of power generation and refining facilities.
In the United States, it has twelve refineries with a combined capacity of 2,208,000 barrels per day (351,000 m3/d). Its diversified oil and gas portfolio includes oil sands developments in Alberta and British Columbia.
Despite its relatively high debt load, ConocoPhillips managed to reduce its borrowings by over $2 billion in the first year of its restructuring plan. The company shifted its emphasis to exploration and production and increased capital spending by over three-quarters of a billion dollars.
By 1996, the company had become one of the top oil companies in the world. In 1999, it posted a record $774 million profit on sales of $27 billion. It also completed a joint venture refinery in Malaysia and won two of the five coveted exploration leases in Venezuela that were up for bidding at the time.
At the same time, its share price rose as well. The firm benefited from higher oil prices as well as the results of its restructuring program and an increase in oil sands exploration in Canada.
It also had a strong balance sheet, which it used to pay dow jones today debt and strengthen its equity position. However, the company lost money in its last two quarters of 1998 due to the drop in oil prices as well as a number of writedowns that were made to reduce the value of reserves and other special charges.
The company’s outlook for the next decade calls for a substantial increase in cash flow, shareholder returns and oil and gas output. ConocoPhillips expects to generate $115 billion in free cash flow for distribution over the next 10 years and expand production by up to 5% per year.
ExxonMobil
Exxon Mobil (XOM) is the world’s largest oil company. Its business includes exploration and production of crude oil, natural gas, and petroleum products. It is also involved in petrochemicals and electric power generation. Its operations are in more than 200 countries and territories worldwide.
In addition to its core petroleum and petrochemical business, ExxonMobil has invested heavily in lower-carbon energy sources such as renewables and carbon capture and storage. These investments are helping the company diversify its revenue stream and create more sustainable long-term value for shareholders.
The recent OPEC+ agreement to cut production is expected to reduce supply, which could boost prices later this year. The International Energy Agency expects that the global economy will start to recover in the second half, and that Chinese demand for gasoline and jet fuel will drive up oil use.
This should help ExxonMobil cash in on higher prices as the economy picks up, and it may make its profits even more lucrative. Its investments in a wide range of lower-carbon energy sources are also helping to ensure that it can continue to meet its emission reduction goals.
Despite its troubles in the 1970s, ExxonMobil has bounced back since the Valdez oil spill and its merger with Mobil. However, the company faces a number of future challenges and risks.
One of the biggest problems for ExxonMobil is the global climate crisis. The company needs to develop a sustainable strategy for growth in the face of rising global temperatures. This will require a significant increase in its investment in lower-carbon energy sources, as well as increased focus on its efforts to cut emissions.
Another challenge for the company is attracting and retaining a talented workforce. It has been especially difficult in the developing world, where insurrections, political upheaval, and armed conflicts are common.
In response, the company has made a series of efforts to promote diversity among its employees. It also aims to hire the best native people in each country it does business in. In 2002, Lee Raymond, the company’s chairman, president, and CEO, told analysts that he is committed to hiring, promoting, and retaining minorities and women in all of its offices and countries.
Chevron
Chevron is a well-known name in the energy industry. It has been in operation for over 125 years, and is one of the largest oil companies on the planet.
It is headquartered in San Ramon, California, and is active in more than 180 countries around the world. The company’s primary product is oil and gas, but it also produces natural gas liquids and has an extensive petrochemical manufacturing business.
The company is a large conglomerate with several subsidiaries, many of which operate in different countries. Its operations include oil shale drilling, refineries, pipelines and tankers.
In 2001, it acquired Texaco to form ChevronTexaco. Then in 2005, it purchased Unocal.
Today, Chevron is a leading global oil and gas producer with an estimated 21.5 billion barrels of oil in reserves. It has operations in more than 90 countries, with a major emphasis on the Middle East and Asia.
Chevron’s history dates back to 1879 when it was established as the Pacific Coast Oil Company to develop a new oilfield in Pico Canyon north of Los Angeles. It was bought by Standard Oil in 1900, and after the antitrust breakup of Standard Oil in 1911 became Standard Oil of California, or “Socal.”
During the 1930s, Socal geologists discovered oil in Saudi Arabia and Bahrain. It later acquired Gulf Oil in 1984, which was one of the largest mergers in history at the time.
While Socal was able to maintain its presence in the United States, it began to struggle with its international operations. The company was forced to sell off a large number of its stations and refineries as a result.
The company has a diverse portfolio of oil and gas assets, with a concentration in the North Sea, Mexico, the Middle East, Africa and Southeast Asia. It also has a significant interest in the Canadian oil shale industry.
Its exploration and production of oil shale is based on an innovative shale-oil extraction process called Chevron CRUSH. It has a partnership with the Los Alamos National Laboratory to develop this technology.
Its shipping fleet, which consists of 308,000 tonne VLCCs, transports crude oil and products to its refineries. The fleet is split into two sections, the U.S. fleet and the international fleet. The international fleet vessels are flagged outside of the United States and crewed by foreign citizens.
Conclusion:
On May 2, 2023, energy stocks were the driving force behind the gains in the Dow Jones Industrial Average, as rising oil prices and increased demand for energy contributed to a boost in investor sentiment.
FAQs:
- What are energy stocks, and why are they important to the stock market?
Energy stocks refer to companies that are involved in the production, exploration, and distribution of energy resources such as oil, natural gas, and renewable energy. These companies are important to the stock market because they play a critical role in meeting global energy demand and can be influenced by a variety of factors such as geopolitical events, economic growth, and regulatory changes.
- What is the impact of rising oil prices on the stock market?
Rising oil prices can have both positive and negative impacts on the stock market. On one hand, energy companies may see increased profitability as a result of higher oil prices. Additionally, rising oil prices can signal a strengthening global economy and increased demand for energy, which can benefit other sectors of the stock market. However, rising oil prices can also lead to inflation and increased costs for businesses and consumers, which can dampen economic growth and negatively impact the stock market.
- What factors contribute to increased demand for energy?
Increased demand for energy can be driven by a variety of factors, such as population growth, economic development, and changes in consumer behavior. Additionally, advancements in technology and the increasing use of renewable energy sources can impact energy demand by reducing the reliance on traditional fossil fuels.
- Should I invest in energy stocks?
The decision to invest in energy stocks should be based on your individual investment goals and risk tolerance. While energy stocks can offer the potential for high returns, they can also be influenced by a variety of factors that can lead to volatility and uncertainty. It is important to conduct thorough research and consult with a financial advisor before making any investment decisions.
- How can I diversify my portfolio to reduce my exposure to energy stocks?
One way to diversify your portfolio and reduce your exposure to energy stocks is to invest in a mix of assets, such as stocks, bonds, and cash. Additionally, you can consider investing in companies from a variety of sectors, such as technology, healthcare, or consumer staples. This can help to balance your risk and reduce your exposure to any one particular asset class.
