If you’re seeking income from your portfolio, dividend-paying energy stocks are a solid choice. These companies have long-lived assets, steady cash flow, and disciplined capital management, enabling them to pay steady dividends to shareholders. They also stand to benefit from the growing demand for energy from utilities and hyperscalers, and offer a hedge against rising energy prices.
If this appeals to you, here are two dividend energy stocks to buy in February.
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ExxonMobil (NYSE: XOM) is a behemoth in the oil and gas industry. As an integrated company, Exxon engages in the exploration and production of gas and oil while also refining fuels into products such as gasoline, diesel, and other petrochemicals. The company has done an excellent job of navigating a volatile oil and gas industry. Its integrated business model and disciplined capital management are a major reason the company has raised its dividend payout for 43 consecutive years.
The company has a rock-solid balance sheet and a break-even price that provides it with flexibility through whatever the commodity cycle throws at it. The company’s assets in Guyana (the Stabroek block) are widely viewed as a low-cost growth engine for Exxon. Over the past five years, the company has had a return on capital employed of 11%, which is 2% better than its closest peer. Longer-term, Exxon expects to lower its break-even cost to $35 per barrel by 2027 and $30 per barrel by 2030.
Not only has Exxon grown its dividend over four decades, but it has also returned substantial capital to shareholders through stock repurchases. For investors seeking a sound business with a reliable dividend, ExxonMobil is a solid choice.
Energy Transfer (NYSE: ET) is an energy middleman with over 140,000 miles of pipeline. The company transports crude oil, natural gas, and natural gas liquids to key end users.
What makes energy transfer appealing in the long term is the key role natural gas will play for utilities and technology companies. The company has over 105,000 miles of natural gas pipelines and 236 billion cubic feet (Bcf) of natural gas storage. As demand for energy from data centers and utility providers grows, energy transfer stands to benefit as it integrates its natural gas network directly with major hyperscalers.
Last year, the company entered an agreement with Oracle to supply natural gas to three of the hyperscaler’s data centers. Under this deal, Energy Transfer would deliver 900 MMcf/d (million cubic feet per day) per day through a lateral pipeline connecting to its Hugh Brinson and North Texas pipelines. In addition, it entered into a 20-year binding agreement with Entergy Louisiana to transport 250 BBtu/d (billion British thermal units per day)per day of natural gas to its facilities in Richland Parish in support of Meta Platforms‘ new data center.
One thing investors will want to keep in mind is that it operates as a master limited partnership (MLP), meaning investors receive a Schedule K-1 instead of a 1099, which can complicate tax filings. With that in mind, Energy Transfer offers a solid dividend, yielding 7.3%, and is well positioned for the growing demand for natural gas from technology companies and utility providers.
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Courtney Carlsen has positions in ExxonMobil. The Motley Fool has positions in and recommends Meta Platforms and Oracle. The Motley Fool has a disclosure policy.
2 Dividend Energy Stocks to Buy in February was originally published by The Motley Fool
