2020 was one of the worst years for the oil industry in history. A massive crash in oil demand, along with Saudi Arabia and Russia's saber-rattling last spring over market share, combined to crash oil prices and wipe out tens of billions of dollars in profits and investor value.
Things have improved, however, and many investors, especially those looking for value, or for stable dividends, are looking at the oil patch as a possible place to invest. Is that a smart move for retail investors to make? On an Oct. 29, 2020, Motley Fool Live Q&A session, "The Wrap" host Jason Hall addressed that exact question. His take: Despite the improvements, there's still a lot of risk in the oil patch, and dividend investors would be better off to look at the future of energy and infrastructure instead.
Jason Hall: Honestly, I don't think that this is a great place to look for a reliable income. I think that there's just way too many questions. I think that there's a lot of value traps in the oil and gas industry.
Royal Dutch Shell (NYSE:RDS.B) for example, I think that they slashed their dividend by 70% not too long ago. BP (NYSE:BP) has cut the dividend. Pretty much all of the large non-North American, the big integrated majors that are the safest investments, they've already cut their dividends. ExxonMobil (NYSE:XOM), like I said, they just announced that they're not going to increase their payout. I think that they could end up having to cut it. Chevron (NYSE:CVX), they have a lot of natural gas and that's an area of strength. But I don't think that it's worth the risk.
I think there's better places to invest in safer investments. Brookfield Infrastructure (NYSE:BIP)(NYSE:BIPC) for example. Brookfield Renewable (NYSE:BEP)(NYSE:BEPC), that's BEP and BEPC. BEP is their limited partnership, BECP is the corporate equivalent. So that means that it pays a dividend the same way like Coca-Cola does. So you get a 1099, the tax implications are a little easier. Atlantica Sustainable Infrastructure (NASDAQ:AY), Clearway Energy (NYSE:CWEN) (NYSE:CWEN.A). The difference, the .A ticker, I think those are non-voting shares, so it tends to trade a little bit cheaper so you can capture a little bit better yield.
These are all renewable energy yieldcos. They operate wind and solar farms. The levelized cost of wind and solar, it's as cheap as anything that you're going to get from hydrocarbons now. So the competitive advantage is getting stronger and stronger. There is a huge tailwind. We know renewables are the future. Those are the types of assets that are going to get deployed and offset -- not just offsetting coal, not just offsetting old natural gas, but also, it's going to be the new energy deployments.
I think that's just the future. I think that there's too much uncertainty to be able to call the oil patch a value place to invest and a good place to capture sustainable dividends.