With oil prices surging 12% in the first half of April and plunging 7.6% since then, owning a stock that pays a dividend can help you profit no matter how prices are moving. That's why today we're recommending the best energy dividend stock to buy in 2017.
Oil stocks that boast strong dividends are a must-have for any energy investor. That's because they still offer solid dividend payouts even if volatile oil prices drag the company's stock price lower. Conversely, when oil prices are climbing and stocks are heading higher, you'll have an additional payout.
While oil prices are now flat so far this month, we expect a strong rally from here.
In fact, Money Morning Global Energy Strategist Dr. Kent Moors' latest oil price prediction shows WTI rising to the $56-$58 range by this September. That would be at least a 13.4% gain from the current price of $49.39.
Those oil price returns would help lift one of Moors' favorite oil stocks, which already boasts a strong dividend yield of 4.83%. Not to mention analysts believe this stock could also hand investors a nice 24.4% return over the next year.
Before we tell you about this energy dividend investment, here's precisely why the crude oil price could rise 13.4% in the next five months...
Why Oil Prices Could Head Higher in 2017
The biggest reason crude oil prices will rally to $56-$58 by September is OPEC's continued production cuts.
On Nov. 30, 2016, the 12-nation oil cartel agreed to slash output for the first time since 2008. The agreement reduced daily production from members by 1.2 million barrels. OPEC also brought 11 outside countries on board, including Russia, to cut daily output by 600,000 barrels. The deal sparked an 8.9% rally in prices over the following two months.
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This rally convinced U.S. producers to pump more oil and bring more rigs back online. After all, higher oil prices mean these struggling producers can make more money on each barrel of oil they produce. This subsequently flooded the market with more oil, lowering demand and dragging prices 8% lower to $49.41 so far this year.
But investors are eyeing up next week's highly anticipated OPEC meeting in which the cartel will discuss extending the output cuts. According to MarketWatch, analysts and strategists widely expect OPEC to maintain the cuts as far out as March 2018.
If OPEC fulfills those expectations, the WTI crude oil price will likely rally in the coming months. Any improvement in market sentiment following the cut extension could easily send prices 13.4% higher to our $56-$58 target range.
That's why we're recommending the best energy dividend stock to invest in this year. This stock will not only offer passive income from its generous dividend, but also possibly offer big returns if oil prices rocket after the May 25 OPEC meeting.
Here's the best energy dividend stock to buy in 2017...
This Is the Best Energy Dividend Stock to Buy This Year
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A great oil dividend stock to consider is Magellan Midstream Partners LP (NYSE: MMP).
Magellan is a master limited partnership (MLP) that transports and stores oil. An MLP is a firm that generates 90% of its revenue from natural resources like oil and typically works in the midstream. That means it stores and transports oil instead of producing - called the upstream - or refining and selling - called the downstream.
Because these businesses only rely on transporting and storing oil, they're able to make money as long as the oil keeps flowing. And Magellan is one of the largest transporters of oil in North America, boasting 10,000 miles of pipelines across the continent.
What's even more exciting is Magellan's presence in a $1 trillion oil boom known as "Permania"...
"Permania" refers to the production growth happening right now across the Permian Basin, a giant oil region spanning across Texas and New Mexico. According to the U.S. Geological Survey last year, there were as many as 20 billion barrels of oil in just one region of the basin.
And Magellan stands to rake in millions from this massive oil boom. The firm is adding about 1.7 million barrels of new oil capacity to its pipelines between its Gulf Coast storage facilities and the Permian.
In other words, Magellan will be making a lot more money now that its transportation capacity will be expanded by 1.7 million barrels. The firm already has a huge 36.4% profit margin, meaning 36.4% of Magellan's revenue becomes profit. That margin will grow as it transports more oil thanks to the Permania oil boom.
Right now, Thomson Reuters analysts say the Magellan stock price could rise 24.4% from its current $72.32 level to $90 by May 2018.
But the Magellan dividend is the one sure thing investors can count on. As of May 18, it offers a dividend yield of 4.83%. That's more than double the average 1.9% yield of the S&P 500.
Magellan's combination of a 24.4% return and above-average dividend make it one of the best energy dividend stocks to buy in 2017.
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