Every major sector has felt the wrath of the novel coronavirus pandemic. However, some industries have completely buckled under pressure — in particular, oil and gas.
Oil stocks are a major casualty of the current crisis, and it’s hard to find a name that is not currently flat or down on the year as of this writing.
The United States Oil Fund, LP (NYSEArca:USO), a proxy for U.S. crude prices with a portfolio mostly of short-term NYMEX futures contracts on WTI crude oil, is down more than 73% YTD. Meanwhile, the iShares U.S. Energy ETF (NYSEArca:IYE) has shed 45.9% of its value in the period. The exchange-traded fund’s 38 stocks represent a who’s who of America’s oil producers.
However, a few oil and gas companies are offering a stable revenue stream despite the pandemic. These are all New York Stock Exchange-listed stocks offering a dividend yield of more than 5%.
Safe Oil Stocks: Exxon Mobil (XOM)
Dividend Yield: 9.65%
Exxon Mobil is still one of the largest publicly traded oil companies in the world. Needless to say, the collapse in oil prices hasn’t been great for the XOM stockholders. And with oil prices still around $40/barrel WTI, it’s unlikely that the situation will change soon. Until demand returns to pre-pandemic levels, the company will have to cut costs and increase efficiency.
In the meantime, several analysts are wondering what will happen to the company’s dividend — one of the highest in the sector. Surely, Exxon will have to look to cut its payout at some point since the company needs to build up its cash reserves.
But at this point, the dividend has become a matter of prestige for the oil giant. That’s why I don’t think that a cut is around the corner.
Also, it’s not exactly like the company is resting on its laurels. It has decreased cash operating costs by 20% year on year and will spend roughly $17 billion this year in capital expenses. That’s down from $30 billion in annualized capital spending budget it had originally approved for the year.
With that in mind, I think that the dividend continues to be safe as we wait for demand to return.
NuStar Energy (NS)
Dividend Yield: 14.35%
NuStar Energy is one of the largest independent liquids terminal and pipeline operators in the country. It controls and operates 10,000 miles of pipeline and 75 terminal and storage facilities, predominantly in the middle of the Midwest. Although Covid-19 hasn’t spared any part of the U.S., petroleum consumption in the middle of the country has not collapsed.
Full story on InvestorPlace.com
Leave a Comment