Big oil on sale
Falling oil prices are also having a predictably negative impact on the price of a number of big dividend-doling energy stocks, some of which are providing yields in excess of 6%.
Buying now, while the prices of big oil names are somewhat tame, could be an opportunity to squeeze an even bigger return out of your portfolio.
Here are three examples of large oil companies paying robust dividends amid the sector’s recent hiccup.
While many big energy companies are steadily moving towards renewables, Exxon is committed to oil and gas, providing investors with a relatively pure way to jump into the space.
Although Exxon isn’t likely to win favor from socially and environmentally conscious investors anytime soon, there’s a good chance that management’s commitment to fossil fuels proves to be the less risky approach for shareholders.
In the most recent quarter, for instance, Exxon earned $4.7 billion in profits on revenue of $67.7 billion thanks to significant recovery in demand. More importantly, the company delivered operating cash flow of $9.7 billion, easily funding several of management’s shareholder-friendly actions.
“We’re realizing significant benefits from an improved cost structure, solid operating performance and low-cost-of-supply investments that, together, are generating attractive returns and strong cash flow to fund our capital program, pay the dividend and reduce debt,” said Chairman and CEO Darren Woods.
With the stock off about 7% over the past three months and offering an especially fat dividend yield of 6.1%, it might be time to ride that operating momentum.
Chevron is another oil-leveraged behemoth that income investors might want to consider.
While the company hasn’t invested much capital in renewable sources of energy, Chevron’s significant position in the attractive Permian Basin and impressive free cash flow generation should give investors plenty of reasons to be bullish about.
In the most recent quarter, Chevron produced earnings of $3.1 billion on revenue of $36 billion. Meanwhile, free cash flow clocked in at multiyear high of $5.2 billion.
Management cited improved market conditions and merger synergies for the strong results.
“Our free cash flow was the highest in two years due to solid operational and financial performance and lower capital spending,” Chairman and CEO Mike Wirth said. “We will resume share repurchases in the third quarter at an expected rate of $2-3 billion per year.”
Chevron shares are off about 7% over the past three months and provide a dividend yield of 5.3%, giving dividend value investors something to think about.
For investors looking for a big energy stock that’s a bit more on the progressive side, BP might be the answer.
Management’s plans to reduce hydrocarbon production by 25% by 2025 and 40% by 2030 is easily the most aggressive transition toward renewables among the major oil companies. That could put BP in a stronger competitive position than its industry peers over time.
And the best part? BP’s swift move away from oil investments doesn’t seem to be impacting its near-term results too negatively.
In the most recent quarter, the company earned $2.8 billion while generating $5.4 billion in operating cash flow. BP even increased the dividend 4% while starting a share buyback of $1.4 billion with surplus cash flow from the first half.
“We are a year into executing bp's strategy to become an integrated energy company and are making good progress — delivering another quarter of strong performance while investing for the future in a disciplined way,” said CEO Bernard Looney.
BP shares down 6% over the past three months and offer a dividend yield of 5.3%.
How to buy these big oil stocks
You don’t need to be an oil tycoon to start investing in these big energy stocks.
If you’re working with a smaller budget, you may want to use an investing app that allows you to buy “slices” of shares for large oil companies — especially one that comes with no fees or commissions.
Another low-budget option is using an app that allows you to invest with just your “spare change,” rounding up to the nearest dollar on all your purchases to help you build a diversified portfolio over time.
Fine art as an investment
Stocks can be volatile, cryptos make big swings to either side, and even gold is not immune to the market’s ups and downs.
That’s why if you are looking for the ultimate hedge, it could be worthwhile to check out a real, but overlooked asset: fine art.
Contemporary artwork has outperformed the S&P 500 by a commanding 174% over the past 25 years, according to the Citi Global Art Market chart.
And it’s becoming a popular way to diversify because it’s a real physical asset with little correlation to the stock market.
On a scale of -1 to +1, with 0 representing no link at all, Citi found the correlation between contemporary art and the S&P 500 was just 0.12 during the past 25 years.
Earlier this year, Bank of America investment chief Michael Harnett singled out artwork as a sharp way to outperform over the next decade — due largely to the asset’s track record as an inflation hedge.
Investing in art by the likes of Banksy and Andy Warhol used to be an option only for the ultrarich. But with a new investing platform, you can invest in iconic artworks just like Jeff Bezos and Bill Gates do.