2 Surging Oil & Gas Stocks With at Least 4% Dividend Yield

Oil prices have been rallying due to a supply shortage, raging inflation, and geopolitical tensions. And OPEC+ missing its production targets could lead to more price volatility. Hence, we think high-yield dividend-paying oil and gas stocks TotalEnergies (TTE) and Valero Energy (VLO) might be solid bets in this scenario. Let’s discuss.

Oil prices are skyrocketing, with the international benchmark Brent Crude up by about $11 per barrel between December and January and have surged by nearly the same amount since the beginning of February, on the back of supply concerns, inflation, and geopolitical tensions. The likelihood the price will surpass $100 per barrel seems to be almost given at this point.

The International Energy Agency (IEA) has called upon the OPEC+ cartel to pump more oil to bridge the gap between stated production quotas and actual output. The agency stated that if the cartel continues to miss its oil production targets, oil prices will see more volatility.

Therefore, we believe these high-yield dividend-paying oil and gas stocks—TotalEnergies SE (TTE) and Valero Energy Corporation (VLO)—might be solid bets for stable income generation.

TotalEnergies SE (TTE)

TTE is an integrated oil and gas company that operates through the four segments of Exploration & Production; Integrated Gas; Renewables & Power; Refining & Chemicals; and Marketing & Services. The company is headquartered in Paris, France.

On February 10, TTE announced that it had agreed with SunPower Corporation (SPWR), a solar technology and energy services provider with TTE as the majority shareholder, to purchase its Commercial & Industrial Solutions (CIS) business for $250 million. The acquisition is expected to allow TTE to extend its distributed generation business footprint to the U.S. and develop more than 100 MW of additional capacity per year.

On February 2, it was reported that TTE and Veolia Environnement S.A. (VEOEY) signed an agreement to produce biomethane. The partners are expected to develop and co-invest in a portfolio of international projects. Stéphane Michel, President Gas, Renewables & Power at TTE, said, “The development of biomethane is part of TotalEnergies’ transformation into a broad energy company, and the deployment of its ambition to be a major player in renewables.”

On February 10, TTE announced the approval of the distribution of a final dividend of €0.66 per share for the 2021 fiscal year, which is the same amount as the three interim payments paid in its 2021 fiscal year. The dividend is expected to be paid to shareholders on July 1 and to ADR holders on July 14. The company’s $3.02 annual dividend yields 5.26% on its current share price. Its dividend payouts have increased at a 2.6% CAGR over the past five years.

TTE’s revenues from sales increased 70.9% year-over-year to $55.30 billion in its fiscal fourth quarter of 2021. Its adjusted net income and adjusted EPS came in at $6.83 billion and $2.55, respectively, up 423.4% and 454.3% from the prior-year quarter.

The $2.32 consensus EPS estimate for its fiscal quarter ending March 31, 2022, indicates a 110.9% year-over-year increase. And its $55.13 billion consensus revenue estimate for the same quarter reflects a 52.8% rise from the prior-year quarter. Furthermore, TTE has an impressive surprise earnings history; it has topped consensus EPS estimates in three out of the trailing four quarters.

Over the past year, the stock has gained 34.3% in price to close yesterday’s trading session at $57.44. It has gained 28% over the past six months.

TTE’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

TTE has an A Momentum grade and a Stability and Sentiment grade of B. It is ranked #6 of the 81 stocks in the Energy – Oil & Gas industry. The industry is rated B. Click here to see the additional POWR Ratings for TTE (Growth, Value, and Quality).

Valero Energy Corporation (VLO)

VLO in San Antonio, Tex., operates internationally as a manufacturer and seller of transportation fuels and petrochemical products. Operating through the three broad segments of Refining; Renewable Diesel; and Ethanol, the company participates in oil and gas refining, marketing, and bulk selling activities.

On February 2, VLO priced $650 million of 4.0% senior notes due 2052. The company intends to use the offering’s proceeds to finance its cash tender offers to repurchase its senior notes issued by Valero Energy Partners L.P. and for general corporate purposes.

On January 20, VLO declared an $0.98 per share quarterly dividend on its common stock, payable on March 3. VLO’s $3.92 annual dividend yields 4.43% on its current share price. The company’s dividend payouts have increased at a 5.9% CAGR over the past three years and a CAGR of 9.4% over the past five years.

For its fiscal fourth quarter, ended December 31, VLO’s revenues increased 116.2% year-over-year to $35.90 billion. Its adjusted net income attributable to VLO stockholders and adjusted earnings per common share came in at $1.01 billion and $2.47, respectively, both registering a considerable increase over their negative year-ago values.

Analysts expect VLO’s EPS to increase 180.9% year-over-year to $1.40 for its fiscal first quarter, ending March 31, 2022. And the Street expects its revenue to come in at $28.93 billion for the same quarter, indicating a 55.1% improvement from the prior-year period. In addition, VLO has beaten consensus EPS estimates in each of the trailing four quarters.

VLO’s shares have gained 36.8% in price over the past year and 33.6% over the past six months to close yesterday’s trading session at $88.53.

It is no surprise that VLO has an overall B rating, which translates to Buy in our POWR Rating system. The stock has a Growth and Momentum grade of B. It is ranked #13 in the Energy – Oil & Gas industry. Click here to see the additional POWR Ratings for Value, Stability, Sentiment, and Quality for VLO.

TTE shares were trading at $58.44 per share on Wednesday afternoon, up $1.00 (+1.74%). Year-to-date, TTE has gained 18.16%, versus a -5.88% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.


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