Energy companies have generated record-breaking profits not seen since the last cycle, largely due to geopolitical conflict and supply concerns, sending prices skyrocketing.
A great way to cash in on these stocks is owning them to generate passive income. Many energy companies have a history of steadily increasing shareholder distributions to reward shareholders via stock buybacks, and also, for the purpose of this article, dividends.
But recently, due to declining oil prices, stock prices in the energy sector are starting to fall, making the effective dividend yield for new stock purchases more attractive.
To be sure, dividend payments are never guaranteed, and a company is free to raise or cut the nominal per share payments at their discretion. It is essential to conduct your own due diligence before investing.
Price Action: The Energy Select SPDR Fund XLE which tracks the top companies in the energy sector, at its peak of $93.31 was offering a dividend yield of 3%, and currently is offering a dividend yield of 3.67%, as the share price declined to $76.57 on Tuesday.
Energy Dividend Stock #1: Ecopetrol S.A. EC
Ecopetrol is offering a dividend yield of 13.29% or $1.49 per share annually and does not have a track record of raising its dividend yield. Ecopetrol is a vertically integrated oil company with operations in Latin America and the United States Gulf Coast, as the company refines and markets crude oil and byproducts produced from its fields.
Revenues in the first half of 2022 increased by 108.3% primarily due to higher international reference prices and stronger price spreads in the Brent for gasoline, middle distillates and jet fuel, which reported record levels.
Energy Dividend Stock #2: Helmerich & Payne Inc HP
Helmerich & Payne is offering a dividend yield of 3.26% or $1.00 per share annually that will be paid out quarterly, as there is no track record of raising its dividend yield. As of 2021, Helmerich & Payne has the largest fleet of U.S. land drilling rigs at roughly 236, with 30 international rigs and 7 offshore platform rigs, also owning 390,000 leasable square footage and 176 acres of undeveloped real estate.
The North America segment saw operating income of $57.4 million compared to operating income of $1.3 million during the previous quarter, driven by improving contract economics and modestly higher activity levels during the quarter.
Energy Dividend Stock #3: Marathon Oil Corporation MRO
Marathon Oil is offering a dividend yield of 1.33% or $0.32 per share annually utilizing quarterly payments, with a track record of raising its dividend yield over the past two years. Marathon Oil is an independent exploration and production company primarily focusing on unconventional resources in the United States.
As of the first half of 2022, Marathon Oil executed $2.3 billion dollars of share repurchases since October 2021, reducing the outstanding share count by 15%, with over $1.6 billion of share repurchases year-to-date.
Energy Dividend Stock #4: Patterson-UTI Energy Inc PTEN
Patterson-UTI Energy is offering a dividend yield of 1.04% or $0.16 per share annually to be paid quarterly, with a track record of raising its dividend yield once over the past year. As of 2022, Patterson-UTI Energy is one of the largest land rig drilling contractors with an average of 126 operating rigs in the United States and maintains moderately sized pressure-pumping operations primarily in Texas and the Appalachian region.
Andy Hendricks, Patterson-UTI's Chief Executive Officer, mentioned, “For the second quarter, our average rig count in the United States increased by six rigs to 121 rigs from 115 rigs in the first quarter. We expect our rig count in the United States will average 128 rigs for the third quarter as drilling activity continues to improve.”
Energy Dividend Stock #5: RPC Inc RES
RPC Inc is offering a dividend yield of 1.02% or $0.08 per share annually that will be paid in quarterly installments, with no track record of raising its dividend yield. RPC provides specialized oilfield services and equipment primarily to independent and major oil and gas companies engaged in the exploration, production, and development of oil and gas properties throughout the United States.
Compared to the prior quarter, second quarter revenues increased 32%, while earnings per share increased by over 200% as net income increased to $46.9 million compared to $15.1 million in the previous quarter.
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