Energy stocks had a horrible 2014. Since March 24, 2014, the overall energy sector has dropped 11% while the S&P 500 index is up almost 13%.
Because of slowing demand and an uptick in U.S. shale production, oil prices have plummeted over 50% since last June. And the industry's performance actually worsened as 2015 started. On March 23, Brent crude fell to $54.74 per barrel. West Texas Intermediate fell $0.94 to $45.56.
But oil will head higher. Money Morning Global Energy Strategist Dr. Kent Moors expects to see it rise to about $58 a barrel here in the United States by late August, $65 a barrel in London. He believes an inevitable mergers and acquisitions (M&A) cycle will create a competitive market environment. The large American operating companies will look to buy the smaller, highly leveraged firms as assets.
Plus, Moors says, "while some new shorts are emerging (indicating a near-term downward pressure in prices), the broader market is still moving into long positions, a calculation by traders that prices will be moving up."
This leaves some of the biggest high-yield energy stocks on sale - so investors can grab some shares for a bargain and collect dividends.
Here are three we like now:
3 Energy Stocks with High Yield
Royal Dutch Shell Plc. (NYSE ADR: RDS-A) operates an independent global gas and oil company. It extracts crude oil, natural gas, and natural gas liquids. As of March 23, RDS has a dividend yield of 6%. The company has averaged its volume at 4.3 million shares per day over the past 30 days. Currently, its market cap is $196.2 billion. Money Morning's Global Energy Strategist Dr. Kent Moors told his readers last month that energy stocks paying dividends like Royal Dutch Shell are a good buy now. "While the turnaround in oil stock fortunes might be delayed, a solid 'play' in the interim would be to focus on stocks with secure dividends to boost returns until they inevitably rally," said Moors.
[epom key="ddec3ef33420ef7c9964a4695c349764" redirect="" sourceid="" imported="false"]
Chevron Corp. (NYSE: CVX): What makes Chevron a lucrative energy stock is the fact that it's one of the largest companies in the world. And it's holding up amid the energy glut because it has a large downstream refining business that does well when oil prices drop. In fact, Chevron's profits fell only 10% in 2014. Another encouraging factor about CVX: it's expected to raise its dividend this year. The company has strategized a plan to cut 13% of its capital spending ($35 billion). It will also halt its buyback program this year. The corporation had been buying back its stock at a rate of about $1.25 billion per quarter. Thanks to these efforts, Chevron looks to raise its dividend yield higher than its current respectable 4%. CVX is also favored by Dr. Kent Moors.
Exxon Mobil Corp. (NYSE: XOM): A new analyst report from Goldman Sachs Group Inc. (NYSE: GS) released Monday, March 9, 2015, gave Exxon a "Buy" rating. Money often follows a GS "Buy" rating. Goldman believes XOM's refining earnings will improve in 2015 and 2016 from its 2014 level. The firm also noted XOM has plenty of "M&A firepower to fund acquisitions." Also appealing to investors about this energy stock is its 3.26% dividend yield. Exxon's dividend payment has grown at an average annual rate of 6.4% over the last 32 years. The company has paid a dividend for 133 consecutive years. That dividend will help boost investor returns until the Exxon Mobil stock price recovers.
Ticking Time-Bomb in the Energy Market: The junk-bond market is worth a lot of money: $1.4 trillion, to be precise. Fifteen percent of those junk bonds come from the energy sector, which was recently hit by a wave credit downgrades. Here's how and why the high-risk "junk" bond market is about to get wrung out...