These Five Energy Stocks Reaching A One-Year High- Read Here

2023-09-26 13:17:55

By : JSB Market Research

In : BLOG

Description: Comprehending energy stocks holds significance for investors due to the pivotal role of the energy sector in the global economy. This sector is responsible for generating and delivering the essential fuels and electricity required to sustain and drive economic activities.

While numerous public companies are involved in energy production and distribution, a select few distinguish themselves through their substantial size and robust financial positions. Here are five top energy stocks worth considering for investment in 2023:

1. Brookfield Renewable

Brookfield Renewable is a global leader in renewable energy, with assets in hydroelectric, solar, wind, and energy transition. It secures steady cash flow through long-term power purchase agreements with utilities and major consumers, using it to pay an attractive dividend and expand its renewable projects. With a substantial project backlog and favorable growth factors, it aims for over 10% annual FFO per share growth through 2027, supporting dividend growth of 5% to 9%. An appealing choice for investors seeking reliable renewable energy dividends.

2. ConocoPhillips

ConocoPhillips is a diversified player in the oil and gas sector, known for its impressively low operating costs at $32 per barrel. Backed by a solid balance sheet and conservative leverage, it's well-prepared to handle volatile energy prices. The company foresees the potential to generate $115 billion in free cash flow over the next decade, primarily due to oil prices above $60 per barrel. In 2023, it plans to return $11 billion to shareholders through various means, including share buybacks and a growing quarterly dividend.

3. Chevron

Chevron is a global energy giant with a diversified presence in the oil and gas industry. Its integrated approach helps it navigate industry volatility effectively. The company uses cash flows from its operations to support a growing dividend, share buybacks, and future investments. Chevron has increased its dividend for 36 consecutive years and plans substantial annual stock repurchases. Additionally, Chevron is committed to reducing carbon emissions and investing in carbon capture, green hydrogen, and renewable fuels. This dual strategy makes Chevron an attractive option for investors in the evolving energy transition.

4. NextEra Energy

NextEra Energy stands as one of the largest electric utility companies in the United States, distinguishing itself as a global leader in clean energy production from wind and solar sources through its energy resources segment. This segment supplies clean energy to other utilities and end-users across the nation.

The company's core businesses yield a consistent cash flow stream, underpinned by government-regulated rates and fixed-price power purchase agreements (PPAs) with customers. This business model exhibits remarkable resilience, as both businesses and households rely on a continuous and dependable supply of electricity.

NextEra Energy boasts one of the electric utility sector's most robust financial profiles, marked by one of the highest credit ratings within its peer group. Furthermore, it maintains a conservative dividend payout ratio, a notable feature for a utility company, ensuring stability and sustainable growth in its dividend payouts. The company has set an ambitious target to increase its dividend at an annual rate of 10% through 2024, solidifying its status as an excellent dividend stock in the renewable energy sector. This strong financial foundation also empowers NextEra Energy to make substantial investments for the future.

In 2022, NextEra Energy launched its Real Zero initiative, aiming to completely eliminate carbon emissions from its operations by 2045. The strategy involves a significant expansion of its solar energy production, the continued operation of its nuclear energy fleet, and the replacement of natural gas in its power plants with green hydrogen and renewable natural gas. These strategic investments are anticipated to not only boost earnings but also align with sustainability goals, representing a win-win proposition for both shareholders and the environment.

5. Enbridge

Enbridge stands as one of the preeminent energy infrastructure firms in North America, operating through four core segments:

● Liquid Pipelines: Enbridge facilitates the transportation of approximately 30% of the oil produced in North America.

● Gas Transmission & Midstream: The company plays a pivotal role in transporting nearly 20% of all the gas consumed in the United States.

● Gas Distribution: Enbridge operates as North America's third-largest natural gas utility when considering customer count.

● Renewable Energy: Enbridge has cultivated a diversified renewable energy platform, including a growing European offshore wind business.

Enbridge's robust energy infrastructure portfolio generates highly dependable cash flow streams, bolstered by long-term contracts and regulatory rate structures. The company allocates a significant portion, approximately 60% to 70%, of this consistent cash flow to investors through an enticing dividend. The remainder is retained to facilitate ongoing expansion initiatives.

With a substantial backlog of commercially secured expansion projects currently in progress, Enbridge enjoys excellent visibility into future growth prospects. The company anticipates a steady cash flow per share increase of around 3% annually through 2025 and an approximately 5% annual growth rate over the medium term.

Enbridge's expanding cash flow trajectory positions it favorably to continue enhancing its dividend payments. Notably, the company achieved its 28th consecutive annual dividend increase in 2022, further reinforcing its commitment to providing value to shareholders.