In this article we listed the best natural gas and oil dividend stocks to buy.
Energy stocks can be hot and cold, ranging from periods of strong performance to periods of relative stagnation. These stocks attract attention from investors, particularly when oil prices surge or geopolitical tension escalates, leading to increased volatility and heightened trading activity. This is what we have seen thus far this year. Energy stocks performed well in the first four months of 2024 because of increasing oil prices. However, when oil prices began to decline in May, energy stocks also fell. The energy sector is up by nearly 7% this year so far but experienced a roughly 4% drop in the past month. As of June 7, oil prices reported their third consecutive week of decline. Investors balanced OPEC+ reassurances with recent US jobs data, which reduced the likelihood of the Federal Reserve lowering interest rates in the near future. The jobs report suggested that interest rates would remain high for an extended period, which usually reduces optimism in the oil market.
While the performance of energy stocks is influenced by oil prices to some extent, the earnings of oil refiners, storage, and transportation companies are not directly dependent on these prices, according to Rob Haworth, senior investment strategy director at U.S. Bank Wealth Management. One of the main reasons for this is that these companies mainly operate on fixed margins or fee-based structures rather than being closely linked with fluctuating prices. Here are some other comments from the analyst:
“Many exploration and production companies have productive oil wells and should be able to generate solid profit margins. Since these companies tend to return capital to shareholders in the form of dividend payouts, their stocks represent an opportunity for income-orientated investors.”
Although energy stocks experienced a rally in the initial months of the year, their behavior seems to align with past patterns, as predicted by analysts. Walter Todd, chief investment officer at Greenwood Capital Associates, said that the historical trend observed in energy stocks resembles a boom-and-bust cycle: when oil prices surge, these stocks also rise, but subsequently, a supply response triggers price declines and causes these stocks to fall. That said, US oil companies are showing greater capital discipline, resulting in higher returns and lower valuations compared to the other sectors in the market.
Though oil dominates the energy market as the largest player, natural gas also holds significant importance and plays a crucial role. It serves various purposes, including power generation, heating commercial and residential buildings, and supporting industrial activities. In addition, it is relatively inexpensive compared to other fossil fuels. Its distinctive attributes have led to an expectation of continued growth in its demand. According to a report by the International Energy Agency, global gas demand is set to increase by 2.5% in 2024, equivalent to 100 billion cubic meters (bcm). The report further mentioned that the steep decline in natural gas prices after the record highs of 2022 is contributing to the rebound in gas demand.
Many oil and gas stocks provide attractive yields, making them appealing to investors who prefer high-dividend stocks. In this article, we will take a look at some of the best dividend stocks from the oil and gas sector.
A close-up of a large industrial compressor in the oil and gas industry.
Our Methodology:
For this list, we first scanned Insider Monkey’s database of 920 hedge funds, as of the first quarter of 2024. Our focus was on selecting gas and oil companies that are involved in the exploration, production, transportation, or distribution of oil and gas. From this pool of companies, we identified 13 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 Q1 2024. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
13. The Williams Companies, Inc. (NYSE:WMB)
Number of Hedge Fund Holders: 26
The Williams Companies, Inc. (NYSE:WMB) is an Oklahoma-based petroleum business company that specializes in natural gas transportation and processing. On April 30, the company declared a quarterly dividend of $0.475 per share, which was in line with its previous dividend. Overall, it has been growing its dividends for eight consecutive years, which makes WMB one of the best dividend stocks from the oil and natural gas sector. The stock has a dividend yield of 4.67%, as of June 10.
In the first quarter of 2024, the company announced that its business is consistently exceeding expectations, with effective management of profitable acquisitions and organic growth leading to immediate gains. During the quarter, the company acquired six storage facilities with a combined capacity of 115 Bcf in Louisiana and Mississippi. These facilities are strategically positioned to meet the increasing demand for LNG exports and power generation. The Williams Companies, Inc. (NYSE:WMB) reported a strong cash position in the first quarter with an operating cash flow of $1.23 billion while its dividend coverage ratio clocked in at 2.6x. Its adjusted EBITDA also grew by $139 million over the past year due to its expansion projects and acquisitions. For FY24, the company expects its adjusted EBITDA to be in the upper half of its guidance range, which is between $6.8 billion and $7.1 billion. This outlook was attributed to increased natural gas demand, especially due to rising LNG export activity and significant growth in power demand from data centers.
The Williams Companies, Inc. (NYSE:WMB) has not attracted much attention from investors as it is not as big as some of its competitors in the energy midstream sector. However, the company’s dividend growth is solid and it has a significant potential to grow its payouts in the future, which offers a reliable investment opportunity for income investors. In addition, its cash generation has remained strong over the years, which has allowed it to strengthen its balance sheet further. In fact, in the most recent quarter, the company produced enough cash to cover its dividend 2.6 times. The stock has a forward P/E of 21.88 and has gained over 14.5% since the start of the year. We believe that the company is well-positioned to benefit from its expansion projects, multiple acquisitions, and growing natural gas demand.
At the end of Q1 2024, 36 hedge funds tracked by Insider Monkey reported having stakes in The Williams Companies, Inc. (NYSE:WMB), down from 46 in the previous quarter. These stakes are collectively valued at over $455.7 million. Ken Griffin’s Citadel Investment Group was the company’s leading stakeholder and remained bullish on the stock during the quarter, growing its stake by 266%.
12. Enbridge Inc. (NYSE:ENB)
Number of Hedge Fund Holders: 32
Enbridge Inc. (NYSE:ENB) is a Canadian pipeline transportation and crude oil company. It transports around 30% of North America’s crude oil production, handles nearly 20% of the natural gas consumed in the US, and operates the largest natural gas utility by volume in North America. The company has a long dividend growth streak, spanning over 29 years. It currently pays a quarterly dividend of C$0.915 per share for a dividend yield of 7.50%, as of June 10.
Enbridge Inc. (NYSE:ENB) reported growth on a year-over-year basis in nearly all segments in Q1 2024. It is one of the best dividend stocks on our list as the company’s payout is on a super safe foundation. In the first quarter of 2024, the company generated over C$3.2 billion in operating cash flow. Its distributable cash flow (DCF) jumped 9% from the same period last year to C$3.5 billion. The company was able to grow its DCF due to higher interest rates affecting floating-rate debt and new issuances and contributions from recently acquired assets. Its strong cash position enabled it to return $34 billion to shareholders through dividends over the past five years. Moreover, the company expects to distribute $40 billion in dividends in the next five years.
The oil and gas industry in Canada is experiencing significant growth, marked by record-breaking oil production and a strategic shift toward reducing dependence on US markets. We think that the company will be able to benefit from this change in the country’s oil and gas industry landscape. ENB is currently trading at a forward P/E ratio of 16.8 and is down by nearly 1.5% this year so far. Considering the company’s recent earnings, dividend policy, and significant cash flow, we think that the stock is relatively cheap.
The number of hedge funds tracked by Insider Monkey owning stakes in Enbridge Inc. (NYSE:ENB) grew to 32 in Q1 2024, from 28 in the previous quarter. These stakes are collectively valued at nearly $260 million.
11. Energy Transfer LP (NYSE:ET)
Number of Hedge Fund Holders: 32
Energy Transfer LP (NYSE:ET) ranks 11th on our list of the best dividend stocks from the oil and natural gas industry. Recently, the company revealed its agreement to purchase WTG Midstream Holdings from affiliates of Diamondback Energy (FANG), Stonepeak, and the Davis Estate for approximately $3.25 billion. The company expects that integrating WTG assets will offer expanded access to rising natural gas and natural gas liquid volumes, thus improving its Permian Basin operations and downstream businesses. Moreover, the company successfully finalized two significant deals last year. It benefits from acquisitions, providing ample momentum and positioning it to achieve an approximate 10% growth in earnings this year.
New growth projects and acquisitions have contributed significantly to volumes on the company’s assets. In the first quarter of 2024, Energy Transfer LP (NYSE:ET) reported a 44% hike in its crude oil transportation volumes while its crude oil terminal volumes were up by 10%. The company reported growth in all segments during the quarter. Its adjusted EBITDA for the quarter came in at $3.9 billion, up over 13% from the same period last year. For FY24, the company expects to generate $15.0 billion to $15.3 billion in adjusted EBITDA.
In addition to acquisitions, Energy Transfer LP (NYSE:ET) is expected to benefit from the growing trend toward electrification within the oil and gas sector, according to a report published by Bank of America. The bank released a list of stocks that are anticipated to profit from this shift, driven by advancements in AI, the expansion of data centers, and the increasing focus on electrification.
Energy Transfer LP (NYSE:ET) is one of the best dividend stocks on our list as the company has been growing its dividends for ten consecutive quarters. It currently pays a quarterly dividend of $0.3175 per share and has a dividend yield of 8.16%, as recorded on June 10. The company’s dividend is safe because of its strong cash flow generation. In Q1 2024, its distributable cash flow grew to $2.36 billion, from $2.01 billion in the prior-year period. Despite its growth projections, the stock’s forward P/E ratio of 9.42 remains below the industry median of 11.8. This shows that the stock is undervalued relative to its potential.
As of the close of Q1 2024, 32 hedge funds owned stakes in Energy Transfer LP (NYSE:ET), compared with 34 in the previous quarter, as per Insider Monkey’s database. The overall value of these stakes is over $928.6 million.
10. EOG Resources, Inc. (NYSE:EOG)
Number of Hedge Fund Holders: 39
EOG Resources, Inc. (NYSE:EOG) is an American energy company that is engaged in the exploration of hydrocarbon. The independent oil and gas company holds a strong history of paying special dividends to shareholders. It currently offers a quarterly dividend of $0.91 per share. With a dividend yield of 3% as of June 10, EOG is one of the best dividend stocks on our list.
In the first quarter of 2024, EOG Resources, Inc. (NYSE:EOG) generated $1.2 billion in free cash flow, which was sufficient to fund its dividend payments of $525 million. The company’s operational execution continues to result in strong returns and the generation of cash flow. Its free cash flow during the quarter facilitated substantial returns to shareholders, all while upholding its industry-leading financial position. Artisan Partners highlighted the company’s position in the sector in its Q4 2023 investor letter. Here is what the firm has to say:
“On the downside in Q4, our two energy holdings, Schlumberger, the world’s largest oil services company, and EOG Resources, Inc. (NYSE:EOG), a US shale-focused E&P company, were weak along with the broader sector. EOG is one of the highest quality operators in the E&P space. EOG has a low-cost production position with a strong reserve base, giving it an advantage versus peers. Further, EOG’s management has long focused on return on invested capital and cash flow generation, distinguishing it from many of the company’s competitors, which prioritize growth over profitability. Its commitment to return excess capital to shareholders via regular and special dividends is also highly appealing, particularly in a period of rising interest rates. The company has proven its ability to create economic value for shareholders, even over the past decade that included the toughest energy commodity environment of the last 30+ years. The company’s strong balance sheet enabled it to increase production capabilities during the prior downturn.”
EOG Resources, Inc. (NYSE:EOG)’s management maintains a positive outlook for the current year, with projections indicating increased production across all of its hydrocarbon categories. Street analysts have maintained a $149.5 price target on the stock, which represents a 23% upside from its current share price. With a forward P/E ratio of 9.65, EOG appears relatively inexpensive considering its earnings, cash flow, and promising outlook.
EOG Resources, Inc. (NYSE:EOG) was a part of 39 hedge fund portfolios at the end of Q1 2024, down from 42 in the previous quarter, according to Insider Monkey’s database. The stakes owned by these hedge funds have a total value of more than $606 million. Among these hedge funds, Harris Associates was the company’s leading stakeholder in Q1.
9. BP p.l.c. (NYSE:BP)
Number of Hedge Fund Holders: 40
BP p.l.c. (NYSE:BP) is a British multinational oil and natural gas company. On May 7, the company declared an interim dividend of $0.4362 per American Depositary Share (ADS), which was in line with its previous dividend. It is one of the best dividend stocks on our list as the company has been making regular dividend payments to shareholders since 1998. The stock supports a dividend yield of 4.82%, as of June 10.
BP p.l.c. (NYSE:BP)’s earnings missed expectations in the first quarter of 2024, however, the company continued its pace of stock buybacks. During the quarter, it announced $1.75 billion share buybacks as a part of its $3.5 billion commitment for the first half of 2024. The company’s adjusted EBITDA fell by $10.3 billion, from $13.06 billion in the same period last year. Its net debt also rose to $24 billion, from $21.2 billion in the same quarter last year and its debt-to-capitalization also increased to 22% from 19.6%. S&P Global downgraded BP p.l.c. (NYSE:BP)’s credit outlook from positive to stable due to slower-than-anticipated debt reduction. This is a setback for CEO Murray Auchincloss, who has been striving to regain investor confidence.
BP p.l.c. (NYSE:BP) announced its plan to allocate 80% of surplus cash to dividends and share buybacks, which is good news for income investors. However, S&P indicated that this approach would not significantly reduce debt, contrary to their previous expectations, even in the current favorable market conditions. The company’s CEO stated his intention to transform BP into a ‘higher value company’ following its FY23 results. This plan involves boosting oil production in the medium term, expanding the liquefied natural gas portfolio by 9% by the end of 2025, and committing to increased share buybacks.
BP p.l.c. (NYSE:BP) has a forward P/E ratio of just 7.30 and analysts forecast that the company’s EPS will grow by 10% annually through the end of 2026.
According to Insider Monkey’s database of Q1 2024, 40 hedge funds held stakes in BP p.l.c. (NYSE:BP), which remained unchanged from the previous quarter. These stakes have a total value of over $2 billion.
8. EQT Corporation (NYSE:EQT)
Number of Hedge Fund Holders: 41
EQT Corporation (NYSE:EQT) is a Pennsylvania-based energy company that specializes in the production of natural gas. The company mainly came to prominence when it acquired Rice Energy in 2017 in a deal worth $6.7 billion. Since then, the shares have jumped by nearly 170%, significantly outperforming the broader market, which gained over 85% during this period. Its acquisition efforts didn’t end there as the energy company is taking steps to reintegrate a large pipeline operation back under its own management. Earlier this year, it signed a merger agreement to acquire Equitrans Midstream Corporation, aiming to form an integrated US natural gas company with an initial enterprise value of over $35 billion. This deal would give EQT ownership of the Mountain Valley Pipeline project. Since the start of the year, EQT is up by nearly 13%.
One of the main reasons for these acquisitions is that EQT Corporation (NYSE:EQT) is concentrating on expanding its scale to lower costs and boost free cash flow. The company has achieved some success in this regard. In the first quarter of 2024, it generated over $1.1 billion in operating cash flow and its free cash flow came in at $402 million. Moreover, the company ended the quarter with approximately $605 million of cash on its balance sheet. It expects to generate over $12 billion in cumulative free cash flow between 2022 and 2027. In addition, the company also managed to reduce its debt and net debt on a year-over-year basis. It currently has a debt/equity ratio of 0.36, which shows that the company’s financing is relatively stable, with a moderate level of debt compared to its equity.
EQT Corporation (NYSE:EQT), one of the best dividend stocks, currently offers a quarterly dividend of $0.1575 per share. The stock’s dividend yield on June 10 came in at 1.55%. Street analysts have maintained a $45.3 price target on the stock, which reflects an upside potential of more than 10%.
Insider Monkey’s database of Q1 2024 indicated that 41 hedge funds owned stakes in EQT Corporation (NYSE:EQT), up from 40 in the preceding quarter. These stakes have a consolidated value of over $674.5 million. With more than 2 million shares, Appaloosa Management LP was the company’s leading stakeholder in Q1.
7. Kinder Morgan, Inc. (NYSE:KMI)
Number of Hedge Fund Holders: 43
Kinder Morgan, Inc. (NYSE:KMI) ranks seventh on our list of the best dividend stocks from the oil and natural gas industry. It is one of the largest energy infrastructure companies in North America, which owns and operates oil and gas pipelines and terminals. In its recent earnings report, the company announced that it expects an increase in demand for natural gas used in electric generation, particularly driven by the expanding operations in artificial intelligence, cryptocurrency mining, and data centers. This demand would contribute to the company’s growth.
Kinder Morgan, Inc. (NYSE:KMI) continues to generate cash flow in line with expectations and objectives. In the first quarter of 2024, the company’s operating cash flow came in at $1.2 billion and its free cash flow amounted to $570 million. This shows that the company’s ability to pay dividends remains secure. It currently offers a quarterly dividend of $0.2875 per share, having raised it by 2% in April 2024. Through this increase, the company stretched its dividend growth streak to seven years, which makes KMI one of the best dividend stocks on our list. The stock supports an impressive dividend yield of 5.79%, as of June 10.
In addition to its strong cash generation, Kinder Morgan, Inc. (NYSE:KMI) also reported a 7% year-over-year growth in its adjusted EBITDA. The company ended the quarter with a net Debt-to-Adjusted EBITDA of 4.1 times, which indicates its position to manage debt obligations. With a debt-to-equity ratio of 1.01, the company expects its net Debt-to-Adjusted EBITDA of 3.9 times by the end of 2024. The company also projects an 8% year-over-year growth in its adjusted EBITDA at $8.16 billion for FY24. The stock is trading at a forward P/E multiple of 15.50, which appears a little low given its earnings growth and full-year outlook.
On June 4, Wels Fargo upgraded Kinder Morgan, Inc. (NYSE:KMI) to Overweight with a $22 price target, expecting growth in the company’s storage and pipeline segments. The firm said that the company is well-positioned to benefit from multiple expansions. KMI has delivered an 11.4% return to shareholders since the start of 2024.
At the end of March 2024, 43 hedge funds in Insider Monkey’s database owned stakes in Kinder Morgan, Inc. (NYSE:KMI), up from 42 in the preceding quarter. The consolidated value of these stakes is over $1.1 billion.
6. Devon Energy Corporation (NYSE:DVN)
Number of Hedge Fund Holders: 44
Devon Energy Corporation (NYSE:DVN) is an Oklahoma-based leading oil and natural gas exploration and production company. It currently pays a fixed and variable dividend of $0.35 per share and has a dividend yield of 5.85%, as recorded on June 10.
In the first quarter of 2024, Devon Energy Corporation (NYSE:DVN) reported a 6% decline in its revenue on a year-over-year basis at $3.6 billion. However, its average daily production during the quarter reached 664,000 barrels of oil equivalent, exceeding the projected figure by 4%. The company also reported a strong cash position, with an operating cash flow of $1.7 billion and a free cash flow of $844 million. This was the company’s 15th consecutive quarter of strong free cash flow. This growth is mainly attributed to the efficiency improvements in the Delaware-focused program. During the quarter, Devon Energy Corporation (NYSE:DVN) returned $430 million to shareholders through dividends and share repurchases, which makes DVN one of the best dividend stocks on our list.
Throughout the first quarter, Devon Energy Corporation (NYSE:DVN)’s financial stability improved as seen by growth in cash reserves by $274 million, reaching a total of $1.1 billion. By the end of the quarter, the company’s outstanding debt stood at $6.1 billion, resulting in a net debt-to-EBITDAX ratio of 0.7 times, indicating a healthy financial position. Due to its strong operating momentum in Q1, the company has now raised its full-year guidance and also increased its cash flow projections. It expects a 2% growth in its production, within the range of 655,000 to 675,000 barrels of oil equivalent per day. The stock has a forward P/E of 8.83. Street analysts have an average price target of $60.8 for DVN, which represents a 28% upside potential. With these growth projections and recent earnings, analysts believe that DVN is an undervalued play.
At the end of the first quarter of 2024, 44 hedge funds tracked by Insider Monkey held stakes in Devon Energy Corporation (NYSE:DVN), down from 50 in the previous quarter. These stakes are collectively valued at nearly $1.1 billion.
5. APA Corporation (NASDAQ:APA)
Number of Hedge Fund Holders: 45
APA Corporation (NASDAQ:APA) is an American holding company. Its subsidiaries explore for and produce oil and natural gas in the US, Egypt, and the UK. The stock has been consistently experiencing a downward trend, falling by nearly 40% from its high in mid-2022. In the first quarter of 2024, the company reported production of 389,000 barrels of oil equivalent per day, which excludes its Egypt production. This showed a 6% decline from the same period last year. Meridian Funds highlighted some reasons for the company’s decline in its Q4 2023 investor letter.
“APA Corporation (NASDAQ:APA) is a global energy exploration and production company with operations in Egypt, the U.K., the North Sea, the U.S. Permian Basin, and Suriname, where it has made a significant oil discovery and sizeable additional discoveries are expected. We believe APA’s core global production profile is underappreciated and that the business is viewed as defensive, given its low cost to maintain and grow production. APA’s Suriname project, which is moving closer to development with partner TotalEnergies, is expected to provide differentiated low-cost production growth in two to three years as TotalEnergies is carrying the bulk of the development cost. This mix has allowed APA to otherwise aggressively allocate capital to pay down debt and increasingly focus on buying back stock as opposed to financing capital-intensive production growth. During the quarter, the stock declined as the mix of falling oil and gas prices and an announcement from TotalEnergies timed Suriname’s potential first production at the far end of estimates. We increased our holding in APA in the fourth quarter since the timing delay would not change the value we ascribe to the Suriname production. Adding to our confidence was news of the potentially increased size and amount of the first production from that region which, in our view, would more than offset the negative effect of the delay.”
We agree with the firm. The company’s debt-to-equity ratio of 1.45 appears high, which has prevented it from investing in costly production expansion. Despite this, APA Corporation (NASDAQ:APA) reported growth on various other fronts in Q1 2024. The company’s operating cash flow for the quarter came in at $368 million, up from $335 million in the prior-year period. Moreover, the ongoing strength in the Permian region pushed US oil production above expectations, marking the fifth straight quarter of meeting or surpassing projected targets. APA Corporation (NASDAQ:APA) generated $99 million in free cash flow during the quarter. Its cash flow generation provides a sense of reassurance for income investors.
APA Corporation (NASDAQ:APA) declared a quarterly dividend of $0.25 per share on May 23, which fell in line with its previous dividend. The stock’s dividend yield on June 10 came in at 3.39%. Due to its strong cash flow generation, the company was able to return $176 million to shareholders through dividends and share repurchases, which places APA on our list of the best dividend stocks from the oil and natural gas sector. According to analysts, the stock’s forward P/E multiple of 6.80x makes it a relatively cheap option. Street analysts have kept an average price target of $37.8 for APA, which shows a 30% upside potential from its current levels. We believe the best time to purchase the stock was in 2021, when it was trading at around $19 per share, coinciding with insider buying.
APA Corporation (NASDAQ:APA) was a popular buy among elite funds at the end of Q1 2024, as hedge fund positions grew to 45, from 35 in the previous quarter, as per Insider Monkey’s database. The stakes owned by these hedge funds have a collective value of nearly $340 million.
4. ConocoPhillips (NYSE:COP)
Number of Hedge Fund Holders: 62
ConocoPhillips (NYSE:COP) is a Texas-based energy company that develops and produces crude oil and natural gas globally. The US oil and gas industry has been experiencing a wave of consolidation as companies aim to enhance their reserves and achieve economies of scale. ConocoPhillips (NYSE:COP) is also participating in the sector’s trend of mergers and acquisitions. Recently, it has agreed to acquire Marathon Oil (MRO) for $22.5 billion and expects to achieve cost savings of $500 million within the initial full year following the completion of the transaction. In addition, the acquisition contributes over 2 billion barrels of reserves to its portfolio.
We believe that ConocoPhillips (NYSE:COP) is poised to benefit from this acquisition. The company mainly emphasizes maintaining a low production cost and diversifying its asset base to generate free cash flow (FCF) consistently, even during periods of low oil and gas prices. It is recognized for its capital allocation strategies. Marathon’s cash generation business model provides ConocoPhillips (NYSE:COP) with additional capital, allowing for more strategic investment opportunities. In its recent earnings report, the company announced that it plans to return $9 billion to shareholders through 2024. In Q1 2024, the company generated $5 billion in operating cash flow and its cash from operations came in at $5.1 billion. It distributed $2.2 billion to shareholders during the quarter through dividends and share repurchases.
ConocoPhillips (NYSE:COP) reported growth in its production in the first quarter of 2024 to 1,902 thousand barrels of oil equivalent per day (MBOED), from 1,792 MBOED during the same period last year. The company reported a decline in its earnings due to impacts from lower prices and higher costs, which were partially mitigated by higher volumes.
ConocoPhillips (NYSE:COP) is one of the best dividend stocks on our list as the company has been rewarding shareholders with growing dividends for the past nine years. It currently pays a quarterly dividend of $0.58 per share and has a dividend yield of 3.40%, as of June 10. The stock’s forward P/E ratio of 12.39 suggests that it may be cheap relative to its earnings outlook. Street analysts have maintained a consensus Strong Buy rating on COP with an average price target of $147.2, which reflected a 30% upside potential.
The number of hedge funds tracked by Insider Monkey owning stakes in ConocoPhillips (NYSE:COP) grew to 62 in Q1 2024, from 59 in the previous quarter. The total value of these stakes is more than $4.4 billion. Among these hedge funds, Eagle Capital Management was the company’s leading stakeholder in Q1.
3. Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Holders: 62
Chevron Corporation (NYSE:CVX) ranks third on our list of the best dividend stocks from the oil and gas industry. The company has made regular dividend payments to shareholders since 1984 and has raised its payouts for 37 consecutive years. It currently pays a quarterly dividend of $1.63 per share and has a dividend yield of 4.16%, as of June 10.
Though companies in the oil sector are generous in paying dividends to shareholders, even when their cash generation is affected by low oil prices, they sometimes incur debt and leverage assets to sustain their payouts. Chevron Corporation (NYSE:CVX) is also open-handed in paying dividends, considering that crude prices have fluctuated within a narrow range over the past several months and are lower than their $120 peak in 2022. In the first quarter of 2024, the company returned $3 billion to shareholders through dividends. Its cash flow from operations fell to $6.8 billion, from $7.2 billion in the prior-year period. This decline was mainly attributed to lower earnings and increased spending on expanding the retail marketing network and retiring assets. However, with a debt-to-equity ratio of 0.19, the company has the flexibility to invest in growth opportunities. Chevron Corporation (NYSE:CVX) is currently in the process of acquiring Hess Corp (NYSE:HES), but the deal is still pending regulatory approval.
Chevron Corporation (NYSE:CVX) is one of the largest holdings of Warren Buffett. His hedge fund, Berkshire Hathaway, started investing in the company during the third quarter of 2020. Since then, the stock has surged by over 100%. CVX has delivered a nearly 5% return to shareholders this year so far.
Insider Monkey’s database of Q1 2024 indicated that 62 hedge funds held stakes in Chevron Corporation (NYSE:CVX), compared with 72 in the preceding quarter. These stakes are worth over $23.2 billion in total.
2. Cheniere Energy, Inc. (NYSE:LNG)
Number of Hedge Fund Holders: 69
Cheniere Energy, Inc. (NYSE:LNG) is an American liquified natural gas company. It reported mixed results in the first quarter of 2024, with its revenue falling by over 42% on a year-over-year basis at $4.2 billion. Its distributable cash flow (DCF) came in at approximately $1.2 billion. The company sells the majority of its LNG through long-term contracts with fixed rates. This business model allows the company to generate steady and predictable cash flow. It expects to generate DCF within the range of $2.9 billion to $3.4 billion in FY24. The company intends to utilize this cash flow for various purposes, including dividend payments, share buybacks, and debt reduction.
Cheniere Energy, Inc. (NYSE:LNG)’s debt-to-equity ratio of 3.42 is higher, however, the company provided guidance that over $10 billion would be utilized for debt reduction and share buybacks through 2026. The company’s CEO expects to surpass this target with ease. Street analysts have maintained a consensus Strong Buy rating on the stock with an average price target of $202.3, which reflects a 28% upside potential.
Cheniere Energy, Inc. (NYSE:LNG) started paying dividends in 2021 and has raised its payouts every year since then, which makes LNG one of the best dividend stocks on our list. The company currently offers a quarterly dividend of $0.435 per share for a dividend yield of 1.10%, as of June 10.
Cheniere Energy, Inc. (NYSE:LNG) was included in 69 hedge fund portfolios at the end of Q1 2024, up from 64 in the previous quarter, according to Insider Monkey’s database. The stakes owned by these hedge funds have a total value of over $2.6 billion.
1. Exxon Mobil Corporation (NYSE:XOM)
Number of Hedge Fund Holders: 81
Exxon Mobil Corporation (NYSE:XOM) ranks first on our list of the best dividend stocks from the oil and gas sector. In the first quarter of 2024, the company achieved a quarterly gross production exceeding 600,000 barrels of oil equivalent per day in Guyana and made the final investment decision for its sixth major development project. Guyana is one of the company’s key exploration areas, where oil production costs are lower, ranging between $25 to $35 per barrel. This cost is comfortably profitable for Exxon Mobil Corporation (NYSE:XOM) due to its larger size and scale compared to other oil exploration companies.
Exxon Mobil Corporation (NYSE:XOM) is well-positioned to thrive during an eventual downturn in the oil industry. Thanks to several years of profits, the company has strengthened its balance sheet. In Q1 2024, it generated $14.7 billion in operating cash flow and its free cash flow came in at over $10 billion. The company also distributed $3.8 billion to shareholders through dividends. In addition, the company maintains a relatively low level of debt, approximately $40 billion, while boasting a substantial cash flow of $33 billion. With a debt-to-EBITDA ratio of 0.58, debt should not be a significant concern for shareholders.
Exxon Mobil Corporation (NYSE:XOM), one of the best dividend stocks on our list, has been growing its dividends for the past 41 years. It offers a quarterly dividend of $0.95 per share and has a dividend yield of 3.36%, as of June 10.
With a collective stake value of over $5.5 billion, 81 hedge funds in Insider Monkey’s database owned positions in Exxon Mobil Corporation (NYSE:XOM), down from 85 in the previous quarter.
While we acknowledge the potential of energy companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: Michael Burry Is Selling These Stocks and Jim Cramer is Recommending These Stocks.
Disclosure. None.
