The energy space is broad and diverse, with some areas doing well and others poorly. Right now, oil and gas-related names are still facing headwinds, which has opened up opportunities for investors interested in financially strong dividend-paying companies. Three that deserve your attention today are integrated energy giant…
1. Still looking pretty cheap
Exxon’s stock is up 6% so far in 2019, but down 13% from the highs it reached earlier in the year. The stock is yielding roughly 4.3%, which is near the highest levels investors have seen here in roughly 20 years, which suggests that income investors could be looking at a bargain price today. Add in the energy company’s incredible 36-year streak of annual dividend hikes (tops among its peers) despite operating in a highly volatile sector and now seems like a great time for a deep dive.
The oil giant isn’t a risk-free investment, but it looks like it is dealing well with the biggest headwind it faces today. For a few years, its oil production was falling, which is bad for an oil company. In the second half of 2018, however, it appears to have stemmed the declines. Put simply, its massive investment plans are starting to bear fruit and the future here is starting to look much better.
But one other thing that really sets Exxon apart is its rock-solid finances. A quick look at the company’s balance sheet tells an important story: Long-term debt makes up less than 10% of the capital structure, an incredibly low figure for any company. This conservative financial positioning should allow Exxon to support its growing dividend and capital investment plans even if oil prices fall into a bear market. Investors of all types would do well to take a good look at Exxon today.
2. Services take a hit
Giants like Exxon hire companies like Helmerich & Payne, which builds and leases out drill rigs, to help them pull oil and natural gas out of the ground. When energy prices are low, demand for drilling services generally falls, often dropping off dramatically as customers pull back on capital spending plans to save money. The sector has been pretty weak since the severe oil price decline in mid-2014. This helps explain why Helmerich & Payne’s stock is down nearly 60% from the highs it reached that year. The yield, meanwhile, is a heady 4.8%, backed by 46 years’ worth of annual increases. Like Exxon, Helmerich’s yield is toward the high end of its historical range.
The problem here is that Helmerich only does well when…
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