This article looks at Retirement Stock Portfolio: 12 Energy Stocks to Consider.

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.

Methodology

To create this list, we looked through Insider Monkey’s Q2 2024 database and selected energy companies engaged in renewable energy, as well as those involved in the exploration, production, transportation, or distribution of oil and gas. From these companies, we chose the top 12 companies that provide consistent dividends to shareholders and play a key role in a retirement portfolio. Next, we ranked them in ascending order of the number of hedge funds having stakes in them at the end of Q2 2024.

Why do we care about what hedge funds do? 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).

12. Chord Energy Corporation (NASDAQ:CHRD)

Chord Energy Corporation (NASDAQ:CHRD) is an independent exploration and production company in the United States involved in the acquisition, exploration, development, and production of crude oil, natural gas, and natural gas liquids in the Williston Basin. Chord Energy currently has a trailing dividend yield of 8.42% and a forward dividend yield of 8.42%, attracting investors’ attention. The company allocates over 75% of its free cash flow to dividends and buybacks, indicating a strong focus on returning value to shareholders

May 2024 marked the completion of the combination of Chord Energy Corporation (NASDAQ: CHRD) and Enerplus Corporation (NYSE: ERF) to create a “premier Williston Basin operator”. The company has had a strong second quarter owing to robust oil production and efficient cost management. This has resulted in an adjusted free cash flow of approximately $263 million in Q2 2024, which is higher than expected. During the three months ended June 30, 2024, net income was $213.4 million ($4.25 per diluted share), compared to $216.1 million in a year-ago period.

The quarter’s performance exceeded guidance, with better-than-expected performance and reduced downtime, contributing to strong financial results. Looking into the future, the company plans to maintain its capital expenditure plans while optimizing its development program, with an updated oil production forecast and continued investment in high-quality assets.

By the end of the second quarter of 2024, 56 out of the 912 hedge funds monitored by Insider Monkey held positions in Chord Energy Corp (NASDAQ:CHRD). The largest investment in Chord Energy Corp was made by Michael Rockefeller and Karl Kroeker’s Woodline Partners, which owned a $126.47 million stake in the company.

Here is what Madison Small Cap Fund stated regarding Chord Energy Corporation (NASDAQ:CHRD) in its first quarter 2024 investor letter:

“Our Energy underweight was also a slight drag, although we are optimistic about our singular investment in this sector with Chord Energy Corporation (NASDAQ:CHRD). During Q1 the company announced a strategic combination with Canadian-based Enerplus Corporation (TSX: ERF). Enerplus is one of, if not the best remaining assets in the Bakken and we are very constructive on the financial and strategic merits of this transformational deal. CHRD will become the largest operator in the Bakken, representing about 12% of the basin’s production. With a solid balance sheet post deal, CHRD will now be in the enviable position of either the basin’s main consolidator or most strategic asset as a target for larger E&P companies.”

11. NRG Energy, Inc. (NYSE:NRG)

An American energy company, NRG Energy, Inc. (NYSE:NRG) engages in the production, sale, and distribution of energy and energy services. It’s one of the largest retail energy providers in the US, serving more than 6 million customers. The independent power producer also boasts 13 gigawatts of coal, gas, and oil power generation capacity.

Since 2012, it has held a steady dividend payment track record and distributes dividends quarterly. As of September 6, its dividend yield was 2.09%. Expanding its operations through acquisitions, NRG Energy, Inc. (NYSE:NRG) has acquired companies such as Direct Energy and Vivint Smart Home over the years. As of 2023, the company reported $100 million in growth in its core businesses and more than $35 million in cost savings.

In the second quarter of 2024, NRG Energy, Inc. (NYSE:NRG) beat earnings expectations with a reported EPS of $1.48, while expectations were $1.3. The company’s GAAP net income was $738 million and Adjusted EBITDA of $935 million, compared to $308 million of GAAP net income and $819 million of adjusted EBITDA in the year-ago period.

The rise in income was mainly due to higher gains from economic hedges in Texas in 2024, owing to heat rate expansion in ERCOT. In 2023, there were losses in the East due to falling natural gas and power prices. This boost was partly offset by a loss from buying back the company’s 2.75% Convertible Senior Notes and higher income tax costs. Free cash flow before growth for NRG Energy came in at $663 million, $238 million higher than the prior year. This was driven by significant growth in adjusted EBITDA and favorable working capital.

At the end of the second quarter, 56 hedge funds tracked by Insider Monkey held stakes in NRG Energy, up from 44 in the previous quarter. Elliott Management is the largest shareholder in the stock having shares worth $806 million.

10. Occidental Petroleum Corporation (NYSE:OXY)

Occidental Petroleum Corporation (NYSE:OXY) is a Houston-based energy company involved in the acquisition, exploration, and development of oil and gas properties in the United States, the Middle East, and North Africa. The three segments it operates through are oil and gas, chemical, midstream, and marketing.

Earlier this year, the company followed through on its commitment when it announced its CrownRock acquisition, raising its quarterly common dividend by over 22%. Free cash flow generation from CrownRock and anticipated profits from non-oil and gas segments of its portfolio gave the company confidence to increase its dividend. Occidental Petroleum Corporation (NYSE:OXY) has raised its dividend for three consecutive years, cutting it in 2020 amidst the negative impacts of COVID-19. Nevertheless, the company’s shareholder priority is to deliver sustainable and growing dividends to its investors in the years to come.

In addition to its $12 billion acquisition of CrownRock, Occidental has also been investing heavily in Carbon capture technology, a risky move that if successful, will help sustain the oil and gas industry. No wonder Warren Buffet bought shares in the company during Q2 2024, bringing Berkshire Hathaway‘s stake to over 255 million.

Occidental Petroleum Corporation (NYSE:OXY) has a trailing twelve-month (TTM) revenue of $27.12 billion. In 2023, the company generated a revenue of $28.26 billion, a decrease of 22.9% from the prior year. Net income and adjusted income attributable to common stockholders for the second quarter of 2024 was $1.0 billion, or $1.03 per diluted share. The company has also disclosed a free working cash flow before working capital of $1.3 billion and demonstrated a strong position to achieve an annual free cash flow of $5.2 billion. This improved working cash flow indicates the company’s positive operational health and financial stability.

At the end of the second quarter of 2024, the number of hedge funds with stakes in Occidental Petroleum Corporation (NYSE:OXY) increased to 62 from 61, with stakes collectively valued at over $185.20 billion.

9. Chevron Corporation (NYSE:CVX)

Chevron Corporation (NYSE:CVX) is an American multinational energy corporation engaged in integrated energy and chemicals operations in the US and internationally. It is one of the largest oil companies in the US.

The corporation is a member of the exclusive Dividend Aristocrats – a group of 68 elite dividend stocks with 25+ years of consecutive dividend increases. Earlier this year, Chevron Corporation (NYSE:CVX) delivered its 37th consecutive year of dividend increase, the second-longest current streak in the oil industry. It has had an annual dividend growth rate of 5.4% over the past three years. Given its strong cash flows, the stock is lucrative for income investors.

In the second quarter of 2024,  Chevron Corporation (NYSE:CVX) reported a robust operating cash flow of $6.3 billion and a free cash flow of $2.3 billion. Leveraging this strong cash generation, the company returned $6 billion to shareholders through dividends and share repurchases, marking the ninth consecutive quarter of providing over $5 billion in shareholder returns. It has a trailing twelve-month (TTM) revenue of $197 billion. It has also had an impressive second quarter this year, with reported earnings of $4.4 billion and adjusted earnings of $4.7 billion.

Worldwide production rose by 11% from the year-ago period driven by the successful integration of PDC Energy, Inc. (PDC) and strong performance in the Permian and Denver-Julesburg (D.J.) Basins. At the end of the second quarter of 2024, 64 hedge funds tracked by Insider Monkey held stakes in Chevron Corporation (NYSE:CVX), having a total value of over $224.06 billion.