With heightened tensions in the Middle East and around the Red Sea, and continuous supply cuts by OPEC+ has led to volatility in oil and gas prices coupled with rapidly growing demand across the world. This has resulted in optimistic prospects for the oil and gas market.
Against this backdrop, it could be wise to invest in fundamentally strong energy stocks Baker Hughes Company (BKR), Cenovus Energy Inc. (CVE), and Energy Transfer LP (ET) with high dividend and growth prospects.
Amid geopolitical tensions and instability fuelling price volatility, natural gas markets have showed strong growth during the first half of 2024. Estimates indicates that global gas demand increased above its historical average rates in the first half. On the other hand, its demand growth has boosted driven by higher gas use across various industries.
Natural gas demand is expected to grow by 2.5% in the full year 2024, primarily driven by fast-growing Asian markets.
Recently, OPEC+ extended most of their deep oil output cuts into next year at a meeting held last month leading to expectations of global oil demand outpacing supply, according to the U.S. Energy Information Administration.
Moreover, with extending OPEC+ cuts limiting world oil production, outside OPEC+ growth appears strong. Petroleum and other liquid fuels global production is expected to grow by 0.6 million b/d in 2024 and is expected to increase by 2.2 million b/d in 2025. Also, global consumption of liquid fuels is forecasted to increase by 1.1 million b/d in 2024 and 1.8 million b/d in 2025.
Considering the encouraging economic trends, let’s delve into the fundamentals of the top three Energy – Oil & Gas stocks, beginning with the third choice.
Stock #3: Baker Hughes Company (BKR)
BKR offers a portfolio of technologies and services to energy and industrial value chains globally. It operates through Oilfield Services & Equipment; and Industrial & Energy Technology segments. The company designs and manufactures products and provides related services, including exploration, development, production, and decommissioning.
On June 27, BKR entered into a new 10-year services frame agreement with Woodside Energy to support its LNG operations in Australia. Under the agreement, BKR will offer spare parts and field service resources for onsite turbomachinery equipment maintenance and upgrades, equipment refurbishment and advanced digital asset performance services.
On June 10, BKR received a significant order from Petrobras for workover and plug and abandonment services in pre-salt and post-salt fields offshore Brazil. Under the multi-year project, BKR will optimize performance for Petrobras and will deploy wireline, coiled tubing, cementing, tubular running, wellbore intervention, fishing, and geosciences services.
On April 23, BKR’s Board of Directors declared a quarterly cash dividend of $0.21 per share of Class A common stock paid on May 16, 2024, to holders of record on May 6, 2024. The dividend reflected 11% increase, or $0.02, from the same quarter last year.
BKR pays an annual dividend of $0.84, which translates to a yield of 2.36% at the current share price. Its four-year average dividend yield is 3.37%. Moreover, the company’s dividend payouts have increased at a CAGR of 11.9% over the past three years.
BKR’s revenue increased 12.2% year-over-year to $6.42 billion during the first quarter that ended March 31, 2024. Its adjusted operating income grew 28.9% from the year-ago value to $660 million. Adjusted net income attributable to BKR and EPS came in at $429 million and $0.43, up 48.4% and 53.6% from the prior year’s quarter, respectively.
Furthermore, the company’s adjusted EBITDA grew 20.6% from the year-ago value to $943 million.
Street expects BKR’s revenue and EPS for the second quarter (ended June 2024) to increase 7.7% and 25.6% year-over-year to $6.80 billion and $0.49, respectively. Moreover, the company has surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive.
BKR’s stock has gained 5.9% over the past month and 13.1% over the past six months to close the last trading session at $35.65.
BKR’s solid fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
BKR has a B grade for Momentum and Growth. It is ranked #13 out of 81 stocks in the Energy – Oil & Gas industry.
In addition to the POWR Ratings we’ve stated above, we also have BKR ratings for Value, Sentiment, Quality, and Stability. Get all BKR ratings here.
Stock #2: Cenovus Energy Inc. (CVE)
Headquartered in Calgary, Canada, CVE develops, produces, refines, transports, and markets crude oil, natural gas, and refined petroleum products internationally. The company operates through four segments: Oil Sands; Conventional; Offshore, Canadian Refining; and U.S. Refining.
On May 1, CVE’s Board of Directors declared a quarterly base dividend of $0.18 per common share, paid on June 28, 2024, to shareholders of record as of June 14, 2024. The Board also declared a variable dividend of $0.13 per common share to shareholders of record on May 17, 2024, paid on May 31, 2024.
Further, the Board declared a quarterly dividend on each of the cumulative redeemable first preferred shares – Series 1 ($0.16), Series 2 ($0.42), Series 3 ($0.29), Series 5 ($0.29) and Series 7 ($0.24) – paid on July 2, 2024, to shareholders of record as of June 14, 2024.
CVE pays an annual dividend of $0.44 per share, which translates to a yield of 2.27% on the current share price. Its four-year average dividend yield is 1.44%. The company’s dividend payouts have grown at a CAGR of 149.8% over the past three years.
CVE’s revenues increased 9.3% year-over-year to C$13.40 billion ($9.73 billion) during the first quarter that ended March 31, 2024. Its net earnings came in at C$1.18 billion ($854.05 million) and C$0.62 per common share, up 84.9% and 93.7% from the prior year’s quarter, respectively.
Furthermore, its adjusted funds flow rose 60.7% and 67.6% year-over-year to C$2.24 billion ($1.63 billion) and C$1.19 per share, respectively.
Analysts expect CVE’s EPS for the second quarter (ended June 2024) to increase 75.2% year-over-year to $0.50 and its revenue for the same quarter is expected to grow 14.9% year-over-year to $11.17 billion. For the fiscal year 2024, the company’s revenue and EPS are expected to grow 7.7% and 29.8% year-over-year to $41.75 billion and $2.08, respectively.
Shares of CVE have surged 29.2% over the past six months and 9.1% over the past year to close the last trading session at $19.47.
CVE’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, translating to a Buy in our proprietary rating system.
The stock has an A grade for Quality and a B for Sentiment and Growth. Within the Energy – Oil & Gas industry, CVE is ranked #3 among the 81 stocks.
Click here to access additional ratings of CVE for Stability, Value, and Momentum.
Stock #1: Energy Transfer LP (ET)
ET provides energy-related services. The company owns and operates natural gas transportation pipelines and natural gas storage facilities in Texas and Oklahoma and approximately 20,090 miles of interstate natural gas pipeline.
On July 24, ET announced quarterly cash distribution of $0.21 per Series I Preferred Unit. The cash distribution for the Series I unitholders will be paid on August 14, 2024 to Series I unitholders of record as of the close of business on August 2, 2024.
ET pays an annual distribution of $1.27, which translates to a yield of 7.74% at the current share price. Its four-year average dividend yield is 9.23%. Moreover, the company’s dividend payouts have increased at a CAGR of 18.1% over the past three years.
On July 15, ET and Sunoco LP (SUN) formed a joint venture combining their respective crude oil and produced water gathering assets in the Permian Basin. ET will be holding 67.5% interest in the joint venture with Sunoco holding a 32.5% interest.
On the same day, ET completed its previously announced acquisition of WTG Midstream Holdings LLC. Total consideration for the transaction was $2,275 million in cash and nearly 50.8 million newly issued ET common units. The acquisition expanded Permian Basin pipeline and processing network providing further access to growing supplies of natural gas and NGLs.
During the first quarter that ended March 31, 2024, ET’s revenues increased 13.9% year-over-year to $21.63 billion. Its operating income grew 15.4% from the year-ago value to $2.38 billion. Its net income stood at $1.69 billion, indicating growth of 16.9% from the prior year’s quarter. In addition, the company’s adjusted EBITDA increased 13% year-over-year to $3.88 billion.
Street expects ET’s revenue for the second quarter (ended June 2024) to increase 17.3% year-over-year to $21.48 billion. The company’s EPS for the same quarter is expected to grow 40.5% year-over-year to $0.35. For the fiscal year 2024, the company’s revenue and EPS are expected to increase 12% and 33.5% year-over-year to $87.99 billion and $1.45, respectively.
ET’s stock has surged 17.7% over the past six months and 23.5% over the past year to close the last trading session at $16.40.
ET’s bright prospects are reflected in its POWR Ratings. It has an overall rating of B which translates to a Buy in our proprietary rating system.
The stock has an A grade for Momentum. It also has a B grade for Growth, Value, and Stability. ET is ranked #2 among 81 stocks in the same industry.
Click here to access ET’s ratings for Quality, and Sentiment.
What To Do Next?
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ET shares were trading at $16.26 per share on Wednesday afternoon, down $0.14 (-0.85%). Year-to-date, ET has gained 22.88%, versus a 15.14% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
3 Energy Stocks to Buy for Dividends and Growth StockNews.com
