On the one hand, oil and gas producer Apache (APA -3.30%) is a decent dividend stock. At its current market price and payout rate, the company sports a 2.05% dividend yield. While not eye-catching, it is above average since it edges out the 1.89% yield for the S&P 500.

That said, the company's yield likely isn't high enough to entice most income investors, especially considering the higher risks associated with the oil and gas industry. That's why dividend investors should forget about Apache and focus on some better options. Three that stand out are ExxonMobil (XOM -1.65%), Chevron (CVX -1.43%), and Occidental Petroleum (OXY -1.84%)

Three oil pumps at sunset.

Image source: Getty Images.

The oil king reigns supreme

ExxonMobil is a Dividend Aristocrat, which makes it royalty among income stocks. Overall, the oil behemoth has increased its payout for 35 straight years whereas Apache's dividend hasn't risen since 2013 and isn't likely to go up this year, either. Furthermore, ExxonMobil currently yields an enticing 3.7%, which is almost twice the market's average and well above Apache's. More importantly, the company can fully support its payout despite lower oil prices. Last quarter, for example, ExxonMobil generated $8.2 billion in cash flow from operations, which covered not only its $3.1 billion in dividends to shareholders but its $4.2 billion in capital expenditures with room to spare.

While the company did struggle to cover both capex and the dividend in 2016 due to crashing oil prices, it still generated $22.1 billion in cash flow, which satisfied its $12.5 billion dividend outlay and some of its $19.3 billion in capital expenditures. One of the drivers of Exxon's ability to generate so much cash flow in a down year is its integrated business model that includes both refineries and chemical plants, which are assets Apache doesn't operate. Those operations generated $8.8 billion of earnings last year for the company, helping offset cash flow lost to lower oil prices. ExxonMobil also has one of the highest credit ratings in the world, backed by low debt to capital of 18%, which is much stronger than Apache's 47% level. Because of those factors, ExxonMobil has the flexibility to continue financing growth and shareholder returns during periods of market weakness, making it a great dividend stock for the long term.

A carbon copy with a slightly higher yield

Chevron is also an oil behemoth, though, at a $200 billion market cap, it's quite a bit smaller than the $350 billion gorilla that is ExxonMobil. In addition, while Chevron also qualifies as a Dividend Aristocrat, its payout growth streak is slightly less at 29 years. That said, it does currently boast a higher yield at 4%, which is almost double what Apache pays. 

While the company did fall short in covering its payout with cash flow from operations last year, that trend has reversed in 2017 due to cost reductions and higher oil prices. Last year's outspend would have also been worse if it weren't for Chevron's downstream refining and chemicals business. Those assets generated $3.4 billion in earnings last year, which helped offset the $2.5 billion loss the company recorded in its upstream segment. That diversification, when combined with the strong balance sheet -- as evidenced by its 20% debt-to-capital ratio -- has been a key factor in Chevron's ability to pay a growing dividend for nearly three decades.

Oil Refinery at Sunset with long shadows.

Image source: Getty Images.

Staying downstream without refining

Occidental Petroleum, at 5%, currently boasts the highest yield in this group. While it doesn't quite have the storied dividend past of Exxon and Chevron, it's still a dividend champion in the energy sector since it has increased the payout for 14 consecutive years. These increases have been robust as well, as the company has delivered a more than 500% increase in the payout since 2002.

Aside from growing oil output, another reason Occidental Petroleum has been able to boost its payout over the years is that it owns several countercyclical assets that generate more cash flow when oil and gas prices decline. While the company doesn't own any refining assets, it does own several chemical plants, including the recently completed Ingleside Ethane plant, which it jointly owns with Mexichem. Add in the fact that Occidental Petroleum has a cash-rich balance sheet with low leverage of just 27% debt to capital, it has the capacity to maintain its dividend over the long term even if crude oil averages $40 per barrel.

Investor takeaway

While Apache pays a better-than-average dividend, it hasn't increased it in years. Furthermore, its lack of owning countercyclical chemical or refining assets, along with higher leverage, keeps its payout level well below those of rivals ExxonMobil, Chevron, and Occidental Petroleum. That's why income investors should cross Apache off their list of potentials and focus on those other three oil stocks instead because they are better income options to own for the long term.