Of course, oil and gas stocks with dividends are primarily appealing to investors. Flush with cash during good times, mature oil and gas stocks usually have limited room to expand rapidly. So, instead of keeping earnings in-house for growth, great oil and gas stocks offer those excess earnings to investors as a dividend.
These oil and gas stocks combine the best of both worlds, offering growth opportunities while keeping income high through dividends.
Kimbell Royalty Partners (KRP)
Kimbell Royalty Partners (NYSE:KRP) is one of the top oil and gas stocks with dividends. Currently, it yields 11.64% and consistently hovers in the low-single digits.
KRP took a beating in recent months as an earnings miss put downward pressure on share pricing. Still, the company’s position is solid and offers investors an upside as they reorient while keeping dividend income flowing.
Though the most recent quarter proved disappointing, KRP’s long-term prospects are appealing. Its 3-year average annual operating income growth rate is more than 100%, showing the firm has the financial chops to cut costs amid energy market volatility. And, though the company recently assumed more debt, its debt-to-equity ratio sits at just 0.31.
Likewise, shares appear oversold and materially undervalued. Its price-to-book ratio is just 1.06, which is low considering its growth record and renewed prospects. Ultimately, though KRP’s recent performance seems poor on paper, this oil and gas stock is set to rebound from renewed energy market enthusiasm. And, of course, its substantial dividend keeps investors happy in the interim.
Occidental Petroleum (OXY)
Occidental Petroleum (NYSE:OXY), a longtime favorite among traders, is capturing massive institutional attention.
Warren Buffett, for example, has been incrementally increasing his stake in the company throughout the year. As of October, he holds over 225 million shares, representing a 25.78% stake in the oil and gas stock. This week, Buffet added to his position and bought an additional $590 million worth of stock after the firm announced an imminent acquisition of a private oil and gas company.
Occidental Petroleum stands out for embracing Buffett’s philosophy of value investing, coupled with a forward-thinking stance on environmental issues. The company is not only advancing in sustainable innovations but also maintaining robust operations, demonstrating resilience. It holds a substantial and enduring market share, particularly due to its strategic locations in key oil-producing regions of the U.S.
In line with Buffett’s ethos, OXY’s financials are solid and offer stability while accounting for growth. Its operating income growth is nearly 70% over the past five years. Plus, its debt is surprisingly low for an oil and gas stock. OXY’s current dividend yield sits at 5.5% but could climb after it closes the current acquisition and has cash to spare.
Phillips 66 (PSX)
Like OXY, Phillips 66 (NYSE:PSX) is a favorite among institutional investors. But PSX’s institutional interest isn’t concentrated within just a few portfolios like OXY.
Instead, institutional insiders own 73% of the company. One activist investor is betting big on PSX, though. Elliott Management, an activist investment firm, holds a $1 billion stake in the company.
But Elliott Management intends to push for changes, decrying “Phillips 66’s performance [is due to having] shifted its focus away from its refining segment.” As the saying goes, “Follow the smart money.” And few indicators of smart money allocation are as strong as high institutional stakes. And, if Elliott Management’s outlook reigns true, investors could win big with this oil and gas stock.
Among other traits, institutional investors like PSX’s 9.5% dividend yield. But that isn’t all PSX offers investors. After a few choppy years, PSX’s net income grew more than 700% in 2022, largely on the heels of renewed cost-cutting and optimization initiatives. Those measures took place before Elliott Management’s activism kickstarted, too. So, the future could mean big things for PSX as it realigns goals and streamlines operations.
On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Jeremy Flint, an MBA graduate and skilled finance writer, excels in content strategy for wealth managers and investment funds. Passionate about simplifying complex market concepts, he focuses on fixed-income investing, alternative investments, economic analysis, and the oil, gas, and utilities sectors. Jeremy’s work can also be found at www.jeremyflint.work.