It's hard to buy good companies when their stock prices keep going up -- especially in a bear market when most stocks are going down. But there are good reasons why Chevron (CVX -0.49%), the iShares Global Infrastructure ETF (IGF 0.42%), and EOG Resources (EOG -3.90%) are all up on the year while the broader indices are down.
Investing in equal parts of each stock gives an investor a dividend yield of 2.9%. Here's what makes each dividend security a great buy now.
Chevron is the complete energy stock package
Daniel Foelber (Chevron): Share prices of Chevron stock are now down over 20% in less than a month as the energy sector pulls back from recent highs due to concerns that demand will weaken in an economic downturn. Yet even with the sell-off, Chevron stock is still up 25% year to date and 40% over the last year.
Despite the stock run-up, there's reason to believe that Chevron is a great long-term buy. The past few years have proven the importance of oil and gas as a staple fuel even as the energy transition from fossil fuels to renewables accelerates. Geopolitical tensions in Europe set the stage for higher U.S. oil and gas production and liquefied natural gas exports to Germany and other allies. On Friday, the Biden administration announced new offshore drilling opportunities in the Gulf of Mexico and offshore Alaska to try to boost domestic production.
Rising oil and gas prices have been a contributing factor to inflation. Adding new production will take time. But when production does increase, we will probably see oil prices eventually fall below $100 a barrel. That's no problem for Chevron, which is arguably the tightest oil and gas major when it comes to spending. Chevron prides itself on having a low cost of production and only investing in plays that can break even at around $40 per barrel.
Chevron is also a Dividend Aristocrat that has paid and raised its dividend for over 35 consecutive years. With a dividend yield of 3.9%, Chevron looks like an excellent way to invest in the oil and gas industry while earning a reliable stream of passive income.
A diversified way to invest in infrastructure
Lee Samaha (iShares Global Infrastructure ETF): If the global economy is going to slip into recession due to interest rate hikes, the war in Ukraine, and policy responses to COVID-19, then it makes sense to start looking at industries that can do well in a slowdown. One option is infrastructure. The argument is that governments tend to support investment in infrastructure to stimulate the economy in hard times. Furthermore, one of the reasons for the supply chain difficulty the economy is in right now is because of a previous lack of investment in transportation and electricity services.
Step forward the iShares Global Infrastructure ETF. The ETF is diversified in its international exposure, and its principal investments are in utilities, transportation, and energy companies.
As such, it will benefit from increased spending on energy pipelines, renewable energy, roads, ports, and airports. In other words, all the things the world needs right now to alleviate the supply chain crisis and rising energy costs. Although the ETF only sports a 2.2% dividend yield at present, it's worth noting that its stock price is up 2.2% over the last year compared to an 11.7% decline for the S&P 500. That's a testimony to its defensive qualities. With a safe and sustainable dividend in tow, it's a useful option for cautious investors.
Oil the wheels of your passive income machine
Scott Levine (EOG Resources): Soaring nearly 29% since the start of 2022, EOG Resources has performed like a lot of other oil and gas stocks this year, rising higher on the heels of booming energy prices. But that's not to say that it's too late to energize your holdings with this dividend machine. Shares of EOG Resources are priced at about 8.3 times operating cash flow, representing a discount to their five-year average of 8.9. Investors, therefore, currently have a great opportunity to pick up a leading energy stock and its 2.5% forward-yielding stock at a bargain.
A premier exploration and production company, EOG Resources has assets predominantly located in the U.S. In 2021, the company's resources in the U.S. accounted for 288 million barrels of oil equivalent, or 95% of its overall production. What will really power investors' penchant for this dividend payer, however, is the company's dedication to rewarding shareholders. How sincere is this dedication? Management has articulated an intent to return 60% of the company's free cash flow to investors.
To put in perspective what that means for shareholders, consider the fact that EOG Resources projects free cash flow of $8 billion in 2022 based on an average price of $95 for West Texas Intermediate -- a forecast that seems well within reach considering the spike in high energy prices over the past few months.
Should the company achieve its free cash flow guidance and return the projected cash to shareholders, it will mean EOG Resources will have grown its dividend at a 28% compound annual rate from 2015 through 2022. That type of commitment bodes well for investors seeking an investment that offers the prospect of continuous dividend growth.