Energy (XLE) is the worst performing sector this year, gaining only 8.0%, versus an amazing 31.0% for the S&P 500 (SPY), and an even more amazing 49.5% for Tech stocks (XLK). Some investors prefer to stick with the hot-hand and choose to ride the momentum of only the hottest zero-dividend aggressive-growth stocks. On the other hand, we tend to be more contrarian in nature, especially when there are big safe dividends involved. And those big safe dividends become even sweeter when there is significant share price appreciation potential. This report ranks our Top 10 Big Safe Energy Sector Dividends. Without further ado, here is the list.
10. Royal Dutch Shell (RDS.B), Yield: 6.3%
Royal Dutch Shell is one of the big integrated oil companies that has been impacted by lower energy prices, as well as the overly pessimistic narrative that fossil fuels are on their last dying leg.
In reality, the world is extremely unlikely to transition dramatically to alternate sources of energy for decades. For example, the International Energy Agency (“IEA”) estimates approximately $21 trillion of oil and natural gas investment will be needed by 2040. For example, the chart below indicates that oil & natural gas demand will continue to remain robust even in 2040. RDS’s oil business continues to be a cash cow and will remain so in the future as global demand persists.
Further, some analysts expect a dramatic slowdown in shale production, which was a major driver of energy price declines, and could therefore provide more strength to prices going forward—a good thing for Royal Dutch Shell and its industry.
And for our full detailed report on RDS, we’re sharing one from a couple months ago that is still very relevant today, and has lots of good information about RDS, such as the important difference between the A shares (RDS.A) and the B shares (RDS.B).
9. Vermilion Energy (VET), Yield: 12.7%
Many investors are quite attracted to Vermilian for its huge dividend (which is paid monthly) as well as its significantly discounted price.
In our view, Vermilian is quite attractive and worth considering, as long as you recognize there are some risks to the business, which we have detailed in our full VET report (linked below). Nonetheless, we believe the shares offer an attractive balance between risks and rewards, and they have significant upside price appreciation potential. You can access our full Vermilion report here:
8. BP PLC, (BP), Yield: 6.5%
Similar to RDS at number 10, BP is a large cap integrated energy company with a juicy dividend and a discounted share price.
We believe the dividend is very safe, and so are the safety standards in place at the company (especially after the Deepwater Horizon incident). We did a deep dive on BP’s business, and you can access that report here:
7. Exxon Mobil (XOM), Yield: 5.0%
Even though Exxon Mobil offers a lower dividend yield than its large cap integrated energy peers (such as RDS and BP) we ranked it as more attractive on this list because the dividend yield is still very big (it’s actually near a 30 year high), the dividend is very safe, and the shares have very significant price appreciation potential in the years ahead as management continues to execute on its attractive “high grading” strategy.
You can read our full write-up on Exxon Mobil here:
6. Tsakos Energy Navigation—Preferred Series-E (TNP.PE), Yield: 9.9%
We’re going with a lessor known preferred stock with a huge dividend yield and a discounted price for our number 6 pick.
Tsakos operates a fleet of 68 marine transportation vessels for crude oil, LNG and other petroleum products, and serves oil companies worldwide on long, medium and short term charters. The dividend on these Tsakos preferred shares is cumulative, and preferred stock is higher than common stock in the capital structure. We also think the shares haven’t risen enough following the sharp rise in shipping rates in early October and a recent charter extension for one of its LNG carriers. You can read our full write-up on Tsakos here:
The Top 5
Our Top 5 Big Safe Energy Sector Dividends are reserved for members only. For reference, we currently own all 5 of the top 5, and we have included a detailed report on each of them. Members can access the full report here…
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