best oil stock: Best Oil Stocks to buy Oil Companies To Invest In

It adds that both Asia and North America will outpace the broader industry in terms of growth since the pair will each exhibit a 1.9% CAGR. Additionally, investors must consider the implications of climate change on the long-term prospects of oil and gas. The energy sector is undergoing a massive transition to renewable energy.

Specifically, ExxonMobil has increased its dividend payout to shareholders for 39 consecutive years. The company currently pays a quarterly dividend of 91 cents per share, and its yield stands at 3.3%. A robust economy can support rising oil prices and oil producer profitability.

Pioneer Natural Resources Company (NYSE:PXD)

Investors today are weighing continued strong economic activity with the threat of a Federal Reserve-induced slowdown to fight inflation. The world’s largest oil-exporting nations include members of OPEC , a cartel that works to coordinate members’ oil policies. It can withhold supply to push prices higher or increase its output to drive them lower. OPEC has wielded its power over the years, causing massive fluctuations in oil prices. Devon’s dividend strategy makes it an enticing option for income-focused investors. They’ll collect a steady base dividend that’s sustainable throughout the oil price cycle and have the potential to earn significant payments during periods of high prices.

Although each segment of the industry has a specific set of risk factors, the overall oil business is both cyclical and volatile. They also supply the core ingredients of petrochemicals used to make products such as plastics, rubber, and fertilizer. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.

Refiners can wind up charging less for their products than they cost to make. This may influence which products we review and write about , but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services.

And in the shorter term, demand for equities in fossil fuel companies could potentially be affected by moves toward sustainable investing, both by individuals and institutions such as pension funds. The investing information provided on this page is for educational purposes only. NerdWallet does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.

Devon Energy (DVN)

Add in the generous dividend yield of 8%, and FANG’s implied total return comes to more than 30%. “EOG is maintaining this growth while paying out 60% of free cash flow to investors via special dividends,” the analyst adds. “EOG’s solid balance sheet, shareholder returns, operational expertise, and deep inventory keep us at a Strong Buy.” With an average price target of $130.42, Wall Street gives COP implied price upside of about 22% in the next 12 months or so. Add in the dividend yield, and the implied total return comes to about 25%. Rather than plow much of their newfound wealth into capital expenditures, oil companies directed their gushers of free cash flow back into shareholders’ pockets via share buybacks, rising dividends and variable dividends.

The Q3 print was the latest in a string of record-breaking earnings for America’s largest oil company. The outperformance sent XOM stock up 67% in 2022 to $105 a share. If the company manages to keep its quarterly profits flowing, the upward momentum of its stock should continue as well. Nonetheless, geopolitical tensions, continued easing of Chinese lockdowns, and/or an economic rebound could boost oil prices next year.

Are oil and gas companies a good investment?

The performance of oil stocks and the energy sector as a whole may not correlate with the broader market, meaning holdings in the energy sector could buoy losses from those elsewhere. In flush times, companies across the industry will distribute a good proportion of their profits to shareholders, rewarding those who stuck around when times were tougher. Oil and gas stocks as a group, measured by the benchmark Energy Select Sector SPDR ETF , have climbed by 23.3% in the past year, outperforming the broader market. However, declining oil and gas prices in the second half of 2022 and into 2023 could pressure margins and revenues in the sector. We used Insider Monkey’s collection of 943 hedge fund portfolios to determine which oil companies they had invested in as of the fourth quarter of last year.

Recent Analysts Ratings of Oil Stocks

Finally, the company complements its low-cost portfolio with a top-tier balance sheet. ConocoPhillips routinely boasts one of the highest credit ratings among E&P companies, backed by a low leverage ratio for the sector and lots of cash. ConocoPhillips is one of the largest E&P-focused companies in the world. It specializes in finding and producing oil and natural gas and has operations in more than a dozen countries. Oil stocks can swing dramatically along with the market for oil.

On Oct. 28, the integrated oil and natural gas company reported arecord profit for last year’s third-quarter, causing analysts and investors to cheer. The Texas-based company said it earned a record $18.7 billion in Q3, up 177% from the same period a year earlier. Its earnings per share of $4.45 blew past analysts’ average $3.79 forecast, according to Refinitivdata.

He also certainly likes Occidental Petroleum’s low P/E ratio of 5.3. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services. Lou Whiteman has no position in any of the stocks mentioned.

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Even so, that doesn’t mean there are few opportunities in the oil patch. Here’s a closer look at some of the top oil stocks and factors to consider before buying oil stocks. Meanwhile, the Street’s average price target of $172.97 gives FANG implied price upside of about 23% in the next 12 months or so.

We believe everyone should be able to make financial decisions with confidence. Of the 28 analysts issuing ratings on FANG tracked by S&P Global Market Intelligence, 16 call it a Strong Buy, eight say Buy, three have it at Hold and one calls it a Sell. That works out to a consensus recommendation of Buy, with very high conviction.

Although it’s possible for investors to brave commodities markets and invest in oil directly, buying equities in oil companies can be more approachable for everyday investors, and potentially less risky. Bulls cite FANG’s compelling valuation – as well as management’s commitment to returning cash to shareholders through buybacks and dividends – as just a few reasons to be constructive on the name. While the S&P 500 generated a total return of 7.5% in the first quarter, XLE’s total return amounted to -4.3%. But the party couldn’t last forever – or at least so it seemed.