The oil and gas industry is seeing strong demand at the moment. Given the industry tailwinds, it could be wise to look into fundamentally sound energy stocks, California Resources Corporation (CRC), Sabine Royalty Trust (SBR), and Energy Transfer LP (ET), offering high dividends and growth.
Benchmark crude oil prices bounced back from six-month lows over the course of June after OPEC+ officials stated that unwinding voluntary production cuts would depend on market conditions and as geopolitical risks remained high.
Simultaneously, natural gas prices increased across all key markets in the second quarter of 2024, reflecting tighter market fundamentals. For the full year of 2024, natural gas demand is forecast to increase by 2.5% in 2024, primarily driven by fast-growing Asian markets.
As tight market conditions prevail, let’s analyze the fundamental aspects of the featured Energy - Oil & Gas stocks, starting with the third choice.
Stock #3: California Resources Corporation (CRC)
CRC operates as an independent oil and natural gas exploration and production, and carbon management company in the United States. The company explores, produces, and markets crude oil, natural gas, and natural gas liquids for marketers, California refineries, and other purchasers with access to transportation and storage facilities.
CRC pays an annual dividend of $1.55 per share, which translates to a yield of 2.99% on the current share price. Its four-year average dividend yield is 1.25%.
In terms of forward EV/Sales, CRC’s 1.65x is 18.4% lower than the industry average of 2.02x. Additionally, its 10.08x forward EV/EBIT is 2.1% lower than the industry average of 10.30x.
CRC’s revenue grew at a CAGR of 4.5% over the past three years. In addition, its total assets grew at a CAGR of 11.5% over the same time frame.
CRC’s total revenues were reported at $514 million during the second quarter that ended June 30, 2024. Its operating income stood at $38 million. Its net income came in at $8 million, and adjusted net income per share grew 13.2% year-over-year to $0.60.
Analysts expect CRC’s revenue for the third quarter (ending September 2024) to increase 118% year-over-year to $1 billion, and its EPS for the ongoing quarter is expected to grow 57.2% year-over-year to $1.60.
Shares of CRC have surged 11.2% over the past three months to close the last trading session at $52.50.
CRC’s solid fundamentals are reflected in its POWR Ratings. CRC has a B grade for Growth. It is ranked #53 out of 78 stocks in the Energy - Oil & Gas industry.
In addition to the POWR Ratings we’ve stated above, we also have CRC ratings for Quality, Momentum, Sentiment, Value, and Stability. Get all CRC ratings here.
Stock #2: Sabine Royalty Trust (SBR)
SBR holds royalty and mineral interests in various oil and gas production properties in the United States. Its royalty and mineral interests include landowner's royalties, overriding royalty interests, minerals, production payments, and other similar non-participatory interests in certain producing and proved undeveloped oil and gas properties.
SBR pays an annual dividend of $5.41 per share, which translates to a yield of 8.40% on the current share price. Its four-year average dividend yield is 8.89%.
SBR’s revenue grew at a CAGR of 35.9% over the past three years. In addition, its total assets grew at a CAGR of 19.2% over the same time frame.
For the fiscal first quarter that ended March 31, SBR’s royalty income increased 13.4% year-over-year to $27.14 million, while its distributable income increased 14.2% year-over-year to $26.28 million. Moreover, its distributable income per unit increased 13.9% year-over-year to $1.80.
The company’s stock has gained 3.5% over the past year to close the last trading session at $65.19.
SBR’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
The stock has a B grade for Growth, Sentiment, and Quality. SBR is ranked #10 in the same industry.
Click here to access all SBR ratings (Momentum, Value, and Stability).
Stock #1: Energy Transfer LP (ET)
ET provides energy-related services. The company owns and operates a natural gas transportation pipeline and natural gas storage facilities in Texas and Oklahoma, as well as approximately 20,090 miles of interstate natural gas pipeline.
On July 16, ET and Sunoco LP (SUN) entered into a joint venture combining their crude oil and produced water-gathering assets in the Permian Basin. ET will hold 67.5% interest in the joint venture, while Sunoco holds 32.5% interest.
Also, ET completed its previously announced acquisition of WTG Midstream Holdings LLC on the same day. Total consideration for the transaction was $2.28 billion in cash and nearly 50.8 million newly issued ET common units. The acquisition expanded the Permian Basin pipeline and processing network, providing further access to growing supplies of natural gas and NGLs.
ET pays an annual dividend of $1.28 per share, which translates to a yield of 7.93% on the current share price. Its four-year average dividend yield is 8.99%. The company’s dividend payouts have grown at a CAGR of 27.5% over the past three years.
In terms of forward EV/Sales, ET’s 1.44x is 28.6% lower than the industry average of 2.02x. Additionally, its 8.26x and 13.04x forward EV/EBITDA and EV/EBIT are 37.9% and 26.6% lower than the industry averages of 5.99x and 10.30x, respectively.
ET’s revenue grew at a CAGR of 17.1% over the past three years. In addition, its total assets grew at a CAGR of 8% over the same time frame.
For the second quarter that ended June 30, 2024, ET’s revenues increased 13.2% year-over-year to $20.73 billion. Its operating income grew 25% from the year-ago value to $2.30 billion. Its net income came in at $1.99 billion, up 61.8% from the prior year’s quarter. In addition, the company’s net income per common unit increased 40% year-over-year to $0.35.
For the quarter ending September 30, 2024, ET’s EPS is expected to increase 120.3% year-over-year to $0.33. Its revenue for the same quarter is expected to increase 13.2% year-over-year to $23.47 billion.
Over the past year, ET’s stock has gained 22.4% to close the last trading session at $16.11.
ET’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has an A grade for Growth and a B for Sentiment, Momentum, and Stability. Within the same industry, ET is ranked #4.
Click here to access additional ET ratings for Quality and Sentiment.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
ET shares were trading at $15.92 per share on Tuesday afternoon, down $0.19 (-1.18%). Year-to-date, ET has gained 22.73%, versus a 18.97% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
3 Energy Stocks Offering High Dividends and Growth StockNews.com
