Oil prices have remained volatile, with traders reacting to the latest production decision from OPEC+, the implications of a U.S. election win for President-elect Trump, and the prospect of weaker energy demand out of China. Crude futures (CLZ24) today have dropped below $70 per barrel, with Wall Street casting a wary eye toward Beijing.
When energy prices are relatively low, it can be an ideal time for investors to scoop up shares of dividend stocks to maximize yield. Despite commodity price volatility, many integrated oil majors in the energy sector remain attractive investment opportunities, offering healthy, steady income with high yield ratios.
In particular, ExxonMobil (XOM), Chevron (CVX), and Shell (SHEL) are all standout energy stocks for investors seeking passive income. These companies have historically provided substantial returns to shareholders through consistent dividend payouts, and their ability to generate healthy cash flows makes them particularly appealing to those looking for steady income in their investment portfolios.
#1. ExxonMobil Stock
Headquartered in Texas, ExxonMobil (XOM) is a global leader in the oil, gas, and carbon capture industries, best known for its extensive operations in the exploration, production, and refining of oil and natural gas (NGZ24). In the most recent quarter, ExxonMobil produced an average of 4.6 million barrels of oil equivalent daily, and commands the largest market capitalization of $532 billion in the oil industry.
ExxonMobil's shares have climbed by 21.4% year-to-date, almost keeping pace with the broader S&P 500 Index's ($SPX) gains.
The company has a remarkable history of dividend payments, consistently increasing its payments for the past 42 years to establish its status as a Dividend Aristocrat. The oil giant is currently paying quarterly dividend of $0.99 per share, which translates to a yield of 3.27% at current levels - significantly higher than the S&P average of 1.5%.
During the Q3 earnings call, CEO Darren Woods stated, "We understand how important the dividend is to our investors, particularly our millions of retail shareholders. We remain committed to a sustainable, competitive, and growing dividend, which is a key component of the attractive total shareholder return we are delivering."
Despite fluctuations in oil prices, ExxonMobil paid out $12.3 billion in dividends so far in 2024, demonstrating its strong balance sheet and healthy cash flow. In Q3 2024, the company generated $17.6 billion in operating cash flow and $11.3 billion in free cash flow. The balance sheet remained robust, with a $27 billion cash balance and a net debt-to-capital ratio of 5%.
Analysts have a “moderate buy” rating on XOM stock, with a mean price target of $130.82. This reflects more than 8% upside potential from the current price.
#2. Chevron Stock
Based in California, Chevron (CVX) is one of the world's leading integrated energy companies, actively engaged in all sectors of the oil, natural gas, and geothermal energy industries. With a market valuation of $280.5 billion, Chevron is the only energy company listed on the 30-stock Dow Jones Industrial Average ($DOWI).
CVX stock has underperformed the broader market this year, up about 5% for 2024 amid weakness in oil prices.
Chevron is a compelling option for dividend-seeking investors, having consistently increased its annual dividend for the last 36 years. It currently offers a high yield of 4.15%, with a quarterly payout of $1.63 per share. The payout ratio stands at an impressive 55.9%.
On Nov. 1, CVX shares surged by 2.8% following the announcement of solid third-quarter results that exceeded analysts' expectations across both lines. Revenue reached $50.6 billion, while adjusted earnings per share of $2.51 surpassed the estimate of $2.47.
During Q3, the oil giant increased its global production by 7%, now producing 3.4 million barrels daily, surpassing ExxonMobil. The acquisitions of PDC Energy and assets in the Permian Basin have notably boosted production volumes.
Over the last two decades, Chevron has transformed into a cash-generating powerhouse. In Q3, it reported operating cash flow of $9.7 billion, supporting share buybacks and dividend payments.
Looking ahead, Chevron is heavily investing in its resource portfolio, initiating key projects in the Gulf of Mexico, Kazakhstan, and Tahiti fields, which are projected to increase supply production by 300,000 BOE/d by 2025.
To strengthen its balance sheet, Chevron is divesting lower-margin assets. Last month, the company announced the sale of its Canadian assets to Canadian Natural Resources for $6.5 billion. It also plans to sell its less profitable assets in Congo and Alaska in the upcoming quarter. These sales are expected to significantly enhance its financial position.
Analysts rate CVX stock a “moderate buy” with a mean price target of $169.38, indicating an expected upside potential of approximately 8.5%.
#3. Shell Stock
Based in London, Shell Plc (SHEL) is one of the oldest players in the oil industry, boasting a rich history that spans over a century. The company operates primarily across energy and petrochemical segments, exploring for, producing, and refining petroleum products. Currently, it holds a substantial market capitalization of $208 billion.
U.S.-traded shares of Shell stock have added just about 1% year to date, reflecting energy price weakness.
Shell offers a quarterly dividend payout of $0.69 per share, yielding 4.10% at current levels. The energy giant also recently announced a stock buyback program of $3.5 billion over the next three quarters.
On Oct. 31, Shell reported an adjusted Q3 profit of $6.03 billion, or $1.92 per share - down 4% year over year, but better than Wall Street expected, as higher liquefied natural gas (LNG) prices offset weakness in the chemical segment. However, revenue of $72.5 billion fell short of consensus expectations.
During Q3, Shell generated a healthy $14.68 billion in cash flow from operations, which surpassed estimates, and reported $10.8 billion in free cash flow. Its net debt-to-capitalization ratio improved to approximately 15.7%, down from 17.3% a year ago.
Overall, analysts remain bullish on SHEL stock, with a consensus "moderate buy" rating from the 19 in coverage. The average 12-month price target is $80, implying an upside potential of more than 21% from current levels.
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