The energy sector is the lifeblood of the economy, keeping the wheels of commerce turning. The past year has been quite a roller coaster for energy stocks, with volatility and performance lagging the broader market. Factors such as slower growth in China have dampened demand, while profit margins have tightened as energy prices have stabilized.
That said, many energy companies have pivoted to a more disciplined approach to capital management. They’re not just weathering the storm — they’re strategically deploying capital while rewarding loyal shareholders through dividends and share repurchase programs.
Given the lackluster performance of energy stocks, now presents an attractive opportunity for investors to buy companies in the sector. Here are three stocks to consider today.
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ExxonMobil and Chevron
ExxonMobil (XOM -1.95%) and Chevron (CVX -0.78%) are two of the largest integrated oil and gas companies in the U.S. today. These businesses are compelling because they operate across the oil and gas supply chain, including exploration and production, transportation, and refining and processing crude oil into refined products like gasoline, diesel, and petrochemicals.
This diversification across the supply chain helps stabilize both companies in the volatile energy sector. That’s because its exploration and production businesses do well when oil prices are elevated. However, when prices fall, its transportation and refining businesses help level out some of the volatility from swings in oil and gas prices.
This integrated business model is also why Chevron and ExxonMobil have grown their dividend payouts for 38 and 42 years, respectively.
President Donald Trump has encouraged more drilling. However, oil and gas companies are cautious about spending on capital projects to increase production. That’s because in the mid-2010s, companies did so. This capex spending, coupled with improvements in drilling technology, enabled U.S. companies to increase oil production drastically. However, it also caused oil prices to plummet.
Oil companies are now taking a strategic approach to production. The Wall Street Journal reported in early February that “another American oil boom isn’t in the cards soon, no matter how many regulations are rolled back, according to oil executives.”
ExxonMobil and Chevron used their windfall profits from elevated oil prices a few years ago to pay debts and strengthen their balance sheets. During the pandemic, their long-term debt peaked at $66 billion and $44 billion, respectively. Since then, the companies have paid 43% and 45% of these debts.
XOM Total Long Term Debt (Annual) data by YCharts
ExxonMobil and Chevron offer investors attractive dividends, yielding 3.5% and 4.1%. These companies are in a much better financial position than during the early days of the pandemic. With both stocks trading around 12 times forward earnings, they are reasonably priced and well-positioned to continue to reward shareholders going forward.
Enterprise Production Partners
Enterprise Production Partners (EPD -0.69%) is a top provider of midstream services in the U.S. and owns a portfolio of pipelines, storage, processing, and transportation assets. The company’s network of pipelines stretches over 50,000 miles. It has significant storage capacity to help facilitate the movement of crude oil and natural gas, natural gas liquids (NGLs), and refined products.
The stock offers investors a high dividend yield of 6.25%, backed by stable, growing cash flows under long-term contracts. The company is coming off a stellar year, seeing record volumes across its systems.
The company is also well-positioned in the current political environment. For one, the Trump administration is focused on deregulation, which could benefit pipeline operators. Reduced permitting requirements could expedite project approvals.
The administration also wants to “unleash American energy” and increase domestic production from the U.S. This could lead to higher demand for midstream providers that provide transportation and storage.
Enterprise Products is bringing significant projects online in 2025. The company has roughly $7.6 billion in projects under construction. The bulk of these projects ($6 billion worth) will come online in 2025, with the remainder expected to go into service over the next three years.
With its stable dividend payout, backed by long-term contracts, and the U.S.’s need for energy to power data centers, Enterprise Products is another solid energy stock for investors to add to their portfolios today.
