If you're like me, trips to the gas station are never something to get excited about. Prices are always changing, in many cases not in your favor.

One way to cope with what I personally call 'gas pump despair' is to own energy stocks. No matter how high the gas pump digits go, you can always comfort yourself by knowing that -- in some small way -- you're paying yourself.

A great energy stock to own is EOG Resources (EOG 0.84%), a Houston-based oil and gas producer. After reporting year-over-year revenue growth of 127% in Q3 2021 (period ended Sep. 30), the company also significantly raised its dividend. In 2021, the company returned $2.7 billion in cash to shareholders, for all they likely dished out at the gas station they got a piece back.

Person holding a gas pump while filling their vehicle tank.

Image source: Getty Images.

EOG rebounds along with the price of crude

There's no getting around it. The cost of crude oil is the main driver for the share price of energy stocks -- and EOG is no exception. When oil prices fell off a cliff in 2020, EOG's shares fell along with it. The stock closed that year down 42%.

But as oil prices have rebounded, so has EOG. Since January 2021, the stock has gained 130% -- outpacing mega-cap producers like ExxonMobil (XOM 0.43%) (91% gain) and the price of oil itself, as tracked through the United States Oil Fund ETF (USO 3.73%) (96% gain).

Suffice to say, this sort of boom or bust price action means that EOG -- and the energy sector more generally -- are volatile for investment. EOG's five-year monthly beta (a measure of stock price volatility) is 1.80, indicating that its average monthly change in price has been almost doubling the monthly move in the S&P 500 index.

That type of volatility is typical in commodity trading. However, EOG isn't just a proxy for oil. It has solid fundamentals that go beyond the price of crude alone.

Cost-cutting pays off

When oil prices tumbled to historic lows in the spring of 2020, there weren't many options for energy producers. They had to slash costs. Oil and gas producers shut down wells and laid-off employees. For its part, EOG cut its production in spring 2020 from 36 operated rigs to eight. Yet, it also saw an opportunity in the 2020 oil shock. It focused on implementing a long-term strategic shift -- what it dubs a 'double-premium' wells strategy. 

And what exactly is the 'double-premium' wells strategy? Well, I'll tell you. It's EOG's plan to expand margins and keep costs low by only investing in wells that generate a 60% (or more) rate of return, this was double the company's former 30% rate -- assuming a $40/barrel price for oil. In practice, this strategy is designed to keep EOG's costs in check. 

But, how? Drilling a new well is not only costly, it's risky. If the price of oil falls, producers often have to shutter wells that are not turning a profit. CEO Ezra Yacob noted on EOG's most recent earnings call that the new strategy was designed to ensure the company's profitability in "all future commodity cycles."

This means locking in the cost savings achieved during the last oil shock in 2020 by avoiding the temptation to ramp up production now that oil prices are approaching $90/barrel. It also means investing in efficiencies and innovations – relying on technology solutions that are scalable, rather than hiring more workers. That sort of discipline means EOG is now and should remain a cash flow machine.

Cash flow: the lifeblood of business

For a mature business like EOG, success means returning value directly to shareholders through dividends and share repurchases. As noted earlier, EOG's 'double-premium' strategy exists to keep the company disciplined and prevent it from growing too fast and investing too much in new, more costly wells.

And this approach is already paying off. EOG's free cash flow hit a record high of $1.4 billion during its most recent quarter. As a result, in November 2021, EOG raised its annual dividend to $3.00/share and declared a special $2.00/share dividend. What's more, EOG is confident the annual dividend isn't going anywhere. On the company's latest earnings call, Chief Financial Officer Tim Driggers put it this way,

"We have paid a dividend for 22 years without suspending or cutting it. At the new level of $3 per year, we can comfortably fund both the dividend and maintenance capex at $40 WTI."

On top of that, over the next five years, analysts expect EOG to grow by 74% per year. With the company's recent cost-cutting, sustainable dividend history, and future growth estimates, investors can rest assured this stock could provide stable income.

Is it too late to buy EOG?

When a stock has jumped 269% from multi-year lows -- like EOG has over the past two years -- it can be challenging to believe there's still more upside ahead. That said, there's no reason to think EOG isn't an excellent long-term investment. Its stock is currently around $115, which is below its pre-pandemic peak of $132.35, and management has successfully reduced costs and established a strategy to return more cash to investors.

So, who should consider adding EOG to their holdings? This stock could be ideal if you believe oil is in a long-term bull market, or possibly your portfolio is underweight in the energy sector, or perhaps you just want to numb that pain you feel at the pump.