Oil stocks may not seem like a particularly attractive area for investors because of the volatility in crude prices stemming from the glut in global supply. In fact, several investment banks are calling for oil prices to weaken even further heading into 2018.

This overtly pessimistic outlook, though, doesn't mean that all energy stocks should be avoided. Our investors, for example, think that top names like Chevron Corporation (NYSE:CVX)ExxonMobil (NYSE:XOM), and Valero Energy (NYSE: VLP) are actually well positioned to create value for patient shareholders -- perhaps making them worth adding to your portfolio this month. Read on to find out more.  

Oil pumps at sunset.

Image source: Getty Images.

A top dividend play

George Budwell (Chevron Corporation): With the average annual crude price hitting a 10-year low last year, the integrated oil and gas company Chevron responded by tightening its belt, in order to lower operating costs across the board. While the oversupply issue that's weighing heavily on crude prices doesn't appear to be fading away, this top dog in the oil and gas industry is making the tough choices required to continue delivering respectable returns for its shareholders over the long term.

Turning to the details, Chevron offers one of the highest yields, at 4.16%, among all oil and gas stocks. Even though the company's 12-month-trailing payout ratio of 281% will certainly raise questions about the sustainability of its better-than-average yield moving forward, investors should bear in mind that Chevron's free cash flows exceeded a whopping $15.5 billion last year, and it has a fairly clean balance sheet to boot -- evinced by its fairly low debt-to-equity ratio of 30.6. Put simply, there's no compelling reason to think that a dividend reduction is a real risk at this stage, especially as the company's considerable efforts to lower costs unfold. 

Next up, Chevron's stock is arguably dirt cheap. Presumably because of the fear that crude prices won't stabilize within the next few years, Chevron's shares are now trading at a rock-bottom price-to-sales ratio of 1.77 -- even though the company is projected to grow its top line at a modest 3.5% next year. 

In the final analysis, Chevron offers a juicy yield that appears sustainable for the long haul, and an extremely attractive valuation for a titan of the oil and gas industry. 

The biggest in big oil

Keith Noonan (ExxonMobil): Shares of ExxonMobil have languished over the last five years, losing roughly 5% of their value while the S&P 500 has climbed more than 75%. The company's competitive advantages and big dividend yield, however, suggest that the oil leader is a stock worth owning.

Exxon has a 35-year history of annual payout increases and has delivered an average annual payout increase of 9.4% over the last decade. Dividend growth has slowed considerably as low oil prices have pressured sales and earnings, and its last payout increase presented only a 2.7% boost -- but its current yield of roughly 3.8% is already enticing.

The company's roughly $11 billion in free cash flow over the trailing-12-month period only covers about 84% of its forward dividend distribution, but Exxon has shown a willingness to take on debt to fund dividends, share buybacks, and capital expenditures. Its history of payout increases suggests it will aim to retain its status as a Dividend Aristocrat.

The company's size and infrastructure advantages put it in good position to run extraction and refining operations at lower costs than the competition. Exxon has also made significant investments in growth avenues including liquified natural gas and new deep-water drilling technologies that could pay off down the line. Its chemicals segment also provides a separate business component to lean on in the event of sliding oil prices, and accounted for roughly 26% of earnings before corporate and financing expenses last quarter.

Between its comeback potential and dividend profile, ExxonMobil looks like a top oil stock to buy this month.

Make a more refined choice of energy stocks

Dan Caplinger (Valero Energy): The energy industry is more complicated than many investors realize, and for some stocks, you have to look beyond the price of crude oil to figure out whether they're likely to be successful. As a refining specialist, Valero Energy actually likes cheap crude oil prices -- as long as they don't come with cheap gasoline, diesel fuel, and other refined-energy products. Valero's best periods of performance in the past have come when gasoline stayed stubbornly high, even when crude oil wasn't as strong, because the spread between what it pays for crude and what it sells its products for makes up its profit.

Recently, Valero has struggled under tough industry conditions, because spreads between crude costs and the proceeds of sales of gasoline and other refined products have been narrow. High inventory levels are preventing gas and diesel prices from climbing despite fairly robust demand, and costs for regulatory compliance have been high.

Yet Valero has been confident about its long-term prospects, buying back huge numbers of shares and using financial tactics like dropping assets into its related master limited partnership. When industry conditions improve, Valero will find itself in a dramatically better position to benefit, and that should lead to rewards for shareholders in the long run.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.