We recently published a list of Retirement Stock Portfolio: 12 Energy Stocks To Consider. In this article, we are going to take a look at where Cheniere Energy, Inc. (NYSE:LNG) stands against other energy stocks in retirement stock portfolio.
Navigating Energy Markets: The Financial Pressures on Clean Energy and the Ongoing Role of Fossil Fuels
In 2023, the clean energy sector took the biggest hit, bearing the brunt of global tensions more than any other sector. Supply chain disruptions, the energy crisis following Russia’s invasion of Ukraine, and the subsequent rise in interest rates and inflation impacted all sectors within the natural resources industry. Meanwhile, traditional energy companies capitalized on strong demand and high fossil fuel prices.
Despite these significant challenges, the necessity of transitioning to clean energy has never been more urgent. This is because, without it, the world will suffer from drastic economic losses associated with climate change. According to Deloitte’s report, “Financing the Green Energy Transition: A US$50 Trillion Catch”, the need for collaboration in developing investment strategies is crucial. As such, the collective investment necessary to achieve the transformation to clean energy is between $5 trillion and $7 trillion per year globally through 2050. Even though the renewable sector is facing pressures on financing, global investment in clean energy is set to double the amount going to fossil fuels this year.
According to the International Energy Agency, for the first time in 2024, total energy investment worldwide is expected to exceed $3 trillion, with an estimated $2 trillion going to clean technologies. The remainder is set to go towards coal, oil, and gas. According to the report, the combined investment in renewable power and grids overtook the amount spent on fossil fuels for the first time in 2023. Even though it is improving, the world needs to catch up on investing in clean energy to make the transition successful.
While the importance of clean energy can not be stressed enough, oil and gas companies continue to play a crucial role in the global energy landscape. They are benefitting from high energy prices and increased demand for fossil fuels as the transition to renewables progresses. This sector remains vital for meeting the world’s immediate energy needs and providing stability in energy markets during the transition period. 2022 was especially a blissful year for them, with skyrocketing oil prices bringing in record profits for oil companies. Big Oil more than doubled its profits to $219 billion. Of course, shareholders were rewarded with substantial returns, with top Western oil companies paying a record $110 billion in dividends and share repurchases to investors in 2022.
While the year was as sparkling as it could ever be, the $70 to $80 per barrel oil prices in 2023 fell short of the above $130 per barrel peak driven by the conflict in 2022. While recent spikes in oil prices, such as those following Russia’s invasion of Ukraine, provided opportunities for stock buybacks and investor rewards, companies face long-term challenges. The shale revolution and the pandemic have already impacted oil profits, and future demand for fossil fuels remains unpredictable.
Despite current financial stability and unchanged borrowing costs, energy firms are cautious about expanding production due to these uncertainties. One way to transition to clean energy that can help such companies is by strategically investing in and developing renewable technologies, such as offshore wind, hydrogen production, and EV charging infrastructure. Leveraging existing expertise and financial strength to diversify their energy portfolios and focusing on customer-centric business models and capital excellence is the way to go.
For retirees, investing in energy stocks offers compelling value due to their stability and dividend potential. Dividend-paying stocks are the kind of stocks one should invest in for retirement as they offer a regular stream of income, as well as allow the principal to remain invested for potential growth. Even though the clean energy sector faces challenges such as financial pressures and investment needs, the overall energy market remains robust. The shift towards renewables is driving significant capital into clean technologies, with global investments in clean energy expected to double those in fossil fuels in 2024. This ongoing transition creates opportunities for stable returns from companies that are involved in both traditional and renewable energy sectors.
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Close-up of a liquefied natural gas terminal expelling plumes of smoke.
Cheniere Energy, Inc. (NYSE:LNG)
Cheniere Energy, Inc. (NYSE:LNG) is a Houston-based American liquefied natural gas company engaged in LNG-related businesses in the United States. It started paying dividends in 2021 and has been raising its dividends ever since. It is currently paying a quarterly dividend of $0.435 per share for a dividend yield of 0.96%, as of September 6.
In Q2 2024, revenue fell to $3.04 billion from $3.92 billion in the year-ago period, primarily due to lower natural gas prices. These natural gas prices have been down by an estimated 16% due to higher global inventories and lower demand forecasts. The company’s full-year profit forecast is below analyst expectations, but it maintains a constructive outlook for the rest of the year.
Back in June, Cheniere Energy, Inc. (NYSE:LNG) announced that its Board of Directors had approved an increase in its share repurchase authorization by an additional $4 billion through 2027, and also has plans to increase its quarterly dividend by approximately 15% to $2.00 per common share annualized from Quarter 3. These moves demonstrate the company’s robust cash flow generation as it continues to follow through on Cheniere’s ‘20/20 Vision’ capital allocation plan (the “Plan”). Zach Davis, Cheniere’s Executive Vice President and Chief Financial Officer, made the following comment about this:
“These increases reflect the continued follow through with our ‘20/20 Vision’ capital allocation plan, which is enabled by Cheniere’s outstanding financial performance, as well as our steadfast commitment to safety and operational excellence throughout our business. The new repurchase authorization will enable us to further reduce share count, and the increased dividend will enhance capital returns while retaining significant financial flexibility to fund accretive growth”.
At the end of June 2024, Cheniere Energy, Inc. (NYSE:LNG) was held by 65 hedge funds tracked by Insider Monkey with collective stakes worth $27.78 billion. Darlington Partners Capital is the largest shareholder of the company with stakes worth $264 million.
Overall, LNG ranks 8th on our list of energy stocks in retirement stock portfolio. While we acknowledge the potential of energy stocks, 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 more promising than NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. Retirement Stock Portfolio: 12 Energy Stocks To Consider is originally published on Insider Monkey.
