Why Phillips 66 Is a Strong Dividend Stock Option

Phillips 66 (PSX -0.71%) not only has favorable dividend growth history, it also has potential to play a pivotal role in the future of energy. In this clip from "The High Energy Show" on Motley Fool Live, recorded on May 31, Motley Fool contributor Jason Hall discusses why the super major is a top stock pick for energy-interested investors.

Jason Hall: I'm going to go with one of those old-school, hydrocarbon-based companies too here, Phillips 66. No surprise to Tyler, I'm sure. So ticker P-S-X, and the thesis is largely going to be based on the things that Tyler was just talking about. Phillips 66 is an integrated super major, so it has its fingers in a lot of the different parts of the oil and gas industry. It's primarily known as a refiner, but it also has a marketing business, so selling the end products. It's one of the largest pipeline operators in the U.S., a lot of that is natural gas. It's one of the largest petrochemical manufacturers in the world, largely in the U.S., but also in the Middle East. Again, here's the reason. Why am I putting this one versus one of the other integrated majors? A couple of reasons. No. 1, it doesn't have an exploration and production business. This is not a company that's in the business of drilling for oil and gas. Yes, it uses natural gas and uses oil as feedstocks in its fuel manufacturing business and its petrochemical manufacturing business. But as we've seen with it's humber facility in the U.K. and it's working on its rodeo refinery near San Francisco to convert those to renewable diesel. Again, all of the things that Tyler was talking about, being able to produce that exact same molecule that goes into the tank, that is produced from largely human-derived bio waste, is massively valuable, versus letting those things rot and letting the methane escape into the atmosphere as a greenhouse gas. There is an immediate economic benefit and you're leveraging those existing assets. You think about its petrochemical manufacturing. Hydrocarbons are used to make tons of things, fertilizers, the rubber for the tires, for our cars, plastics that serve so many aspects of our life and being able to manufacture those things from biomethane is really valuable. Again, the existing infrastructure is going to be so important and Phillips 66, I think, is a leader. It's very, very well-run. They've gone through a CEO change recently. One of the founders of this business when it was spun out for ConocoPhillips (COP -0.08%) has announced he's retired and have great leaders that are coming in to replace him. Right now, you can buy this company. It's still cheaper than it was in late 2020 and 2019. Great dividend growth history. Dividend yield is over 3.6% right now, and I think this is definitely going to be an important part of the future of energy.