There’s Value Left in Energy, But Don’t Wait Too Long to Buy: Valero Energy Corporation (VLO), Chevron Corporation (CVX)

Deep value with this pure upstream play…

And then there is ConocoPhillips (NYSE:COP) , which, unlike its fellow integrated competitors at the time, decided that it would be better to separate its downstream and upstream businesses. After spinning its downstream business into Phillips 66 (NYSE:PSX), which took away the refining aspect of the business, Conoco is solely a production and exploration company — the largest in world, in fact, based on oil production and reserves.

Ditching its downstream assets negatively effected earnings in the short-term, and there is now a reduction in safety for the company should oil prices drop significantly, but the company is also diversified with natural gas and is extremely dedicated to shareholders. Conoco currently pays investors an inflation-beating dividend yielding out 4.6%, while being priced at almost 9 times earnings.

Any sign of global economic recovery — especially in China — that increases demand for oil, may move the stock. Otherwise, you can sit back and enjoy the yield.

The bottom line

The energy sector still looks attractively valued in a market flirting with all-time highs. The refiners have already had a nice run-up, but should continue to enjoy high margins and increasing profits with the help of cheap domestic crude. The larger integrated oil companies haven’t run up as much, and may be a safer play at his point. Chevron Corporation (NYSE:CVX) and Exxon also pay better than Valero Energy Corporation (NYSE:VLO), whose dividend yield is under 2%. ConocoPhillips may pose the most risk, but that 4.6% dividend will pay you to wait for a pick-up in its share price.

The world will be dependent on oil, and increasingly natural gas, well into the future — and now looks like a good time to jump into this sector; whether it be an upstream, downstream, or integrated company comprising both.

The article There’s Value Left in Energy, But Don’t Wait Too Long to Buy originally appeared on Fool.com and is written by Joseph Harry.

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