ENB - 2 High-Yield Energy Stocks to Buy Hand Over Fist and 1 to Avoid
2024-05-24 05:20:00 ET
Are you looking for a reliable dividend stock in the energy sector? There are some very good ones, including Chevron (NYSE: CVX) and Enbridge (NYSE: ENB) . But you have to be careful because some high-yield energy stocks aren't what they at first seem, including Devon Energy (NYSE: DVN) . Here's why dividend investors will want to avoid Devon but should consider buying stock in Chevron and Enbridge.
There's nothing wrong with Devon Energy's dividend policy. In fact, you could competently argue that it's the most effective way to reward shareholders when oil prices are high. The problem is that it also asks investors to share the pain when oil prices are low. What's going on here? Devon Energy has a variable dividend policy tied to the company's financial performance.
Since Devon Energy is an upstream oil and natural gas producer, its top and bottom lines are directly tied to the highly volatile price of energy commodities. Investors directly benefit when oil prices are high through higher dividends and directly "suffer" when oil prices are low as the dividend gets cut accordingly. For example, in 2022 the quarterly dividend went from $1.00 per share to a high of $1.55. It ended the year at $1.35 per share. In 2023 the dividend fell as low as $0.49 per share.
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2 High-Yield Energy Stocks to Buy Hand Over Fist and 1 to Avoid