Oil and natural gas prices are high in 2022, but were painfully low in 2020, which highlights the inherent volatility of the sector. If you want to make sure you have some exposure to oil in your portfolio, you need to keep that in mind as you pick energy stocks. Shell (SHEL -1.27%) and ConocoPhillips (COP -1.84%) are two names you might want to look at, but for very different reasons.

Inflation hedge

If you've filled up your gas tank recently, you know that inflation is roaring. That's bad news for your wallet, but good news for oil and natural gas producers like ConocoPhillips. This company is somewhat unique among large energy companies in that it is focused solely on production, having spun off its midstream and refining assets many years ago. As such, ConocoPhillips' fortunes are more leveraged to oil and natural gas prices relative to other large names like ExxonMobil, which has a more diversified business model.

However, that's not all bad, as it makes ConocoPhillips something of an inflation hedge on the investment front. But it gets better than that, because the energy company also has a unique dividend structure. First, it pays a regular dividend that is fairly modest by industry standards. The dividend yield today is around 2.2% based on the regular $0.46 per share quarterly dividend. But in addition to this payment, the company may also make a special payment tied to the price of oil. The most recent special dividend was $0.70 per share. The special dividend, however, is variable and can go all the way down to zero if oil prices plunge. 

For investors who favor consistent passive income this variable dividend policy probably won't be a good fit. Those concerned about inflation, however, will probably like the idea of getting an extra shot of income when energy prices are on the rise.

Shifting things around

Another interesting option in the energy patch today is Shell, but for a completely different reason. For starters, the integrated energy major cut its dividend in 2020. However, this was meant to reset the business, with management announcing plans to start a slow shift toward clean energy and away from oil at roughly the same time. In other words, the company is working to ensure its long-term survival in the face of a changed energy landscape.

That dividend cut, meanwhile, came with a commitment to quickly get back on the dividend growth path. To that end, management has increased the dividend four times since the cut, amounting to a 55% increase in roughly two years. Meanwhile, Shell has been, as it said it would, investing in clean energy assets. So, all in, management is doing exactly what it said it would as it looks to adjust along with the broader energy industry.

A dividend cut is never a good thing. But Shell has quickly started to prove that the business reset it started in 2020 is working. Today's high oil prices are clearly helping, but the real takeaway is that this over 100-year-old oil major is looking more and more like a long-term survivor. The dividend yield today is around 3.5% and the quarterly payment looks like it is back on a sustainable growth path.

Differences matter

If you have $10,000, ConocoPhillips is a way to add energy to your portfolio that will help protect your wallet from the ravages of inflation (noting that the variable dividend can go down as well as up as oil prices fluctuate). Shell, meanwhile, is a less exciting long-term dividend stock that looks like it will easily survive the slow and steady transition toward cleaner alternatives while rewarding investors with a reliable passive income stream. They are very different options in the clean energy space, but both are worth deep consideration.