There's no denying that ExxonMobil (XOM 0.39%) is an elite dividend stock. The oil behemoth has increased its payout for 40 straight years, including by 3.4% late last year. The company's payout currently yields 3.4%, which is double the S&P 500's dividend yield.
However, as good as ExxonMobil is at paying dividends, some companies currently look like better options for income-seeking investors. TotalEnergies (TTE 0.52%), TC Energy (TRP 0.33%), and Enterprise Products Partners (EPD -0.31%) currently stand out to a few Fool.com contributors as even better options than Exxon for those seeking dividend income from the energy sector.
Doing more
Reuben Gregg Brewer (TotalEnergies): There are very good reasons to buy a global diversified integrated energy major like Exxon. But there's one crucial issue that this oil giant doesn't address, and that's clean energy. Yes, Exxon is investing in the space, but it is on the fringes of its business. TotalEnergies, by contrast, has just started to break out a new division, called integrated power, that basically represents its clean energy investments.
To be fair, the division is tiny at just 5% of the adjusted net operating income from the company's operating segments. But this is a new business and TotalEnergies is building it quickly via acquisition, including the first-quarter 2023 purchase of a 34% stake in a leading Brazilian renewable power developer and the acquisition of a roughly 50% stake in a Taiwanese wind farm. And those are just recent moves; the company has been investing in clean energy for years.
But the really interesting thing is that TotalEnergies was very clear during the deep energy downturn in 2020 that it places a high value on dividends. So the 4.6% yield (U.S. investors have to pay French taxes on the income) isn't going to be sacrificed in the name of the company's clean energy ambitions, which is basically what happened at European peers BP and Shell. That doesn't inherently make them bad companies, but if you are attracted to Exxon's reliable dividend, TotalEnergies has shown it can provide a similar level of comfort and a more aggressive effort to transition with the global energy market.
More income with less volatility
Matt DiLallo (TC Energy): ExxonMobil's oil-fueled cash flows vary with crude prices. That has caused some concerns about its ability to pay dividends when oil prices crashed in the past. It could happen again in the future if oil enters another prolonged downturn.
Oil price volatility isn't a concern for TC Energy. The company makes most of its money operating pipelines, which produce very stable cash flow backed by long-term contracts and government-regulated rate structures. The company also produces electricity, which generates relatively steady earnings.
TC Energy's lower-risk business model supplies it with lots of recurring cash, half of which it pays out in dividends. The Canadian energy infrastructure giant's payout currently yields 6.6%, well above Exxon's payout level.
TC Energy uses the other half of its cash flow to help fund expansion projects, which supplements its solid balance sheet and capital recycling program. It has an industry-leading backlog of projects. Notable expansions include building a large-scale pipeline to transport natural gas to LNG export facilities along Canada's western coast, a second offshore pipeline in Mexico, and a program to extend the life of its nuclear power plant. Those expansions will grow its cash flow, giving TC Energy more fuel to grow its dividend.
The pipeline company has increased its dividend for 23 straight years. It expects to continue growing its payout, targeting to expand it at a 3% to 5% annual pace. That's a potentially faster pace than Exxon's. Add it up and TC Energy offers more income now and predictable growth with less volatility, making it a smarter buy for income-seeking investors.
A steadfast dividend payer
Neha Chamaria (Enterprise Products Partners): ExxonMobil's track record makes it a great dividend stock to own for the long haul, but there's another dividend stock from the oil and gas space that I believe could be an even better buy for two reasons. It has grown its dividend per share at a similar pace as Exxon over the past decade but offers more than twice its dividend yield, and it operates in a part of the industry that is less affected by the volatility in oil and gas prices. That's midstream energy company Enterprise Products Partners.
Enterprise has increased its dividend every year for 24 consecutive years. Last year, the oil and gas pipeline and processing company increased its payout by 5.4%. That's still a modest dividend raise, and that's because Enterprise has prioritized reinvesting cash into its business and reducing debt over dividend growth in recent years.
Where things stand now, Enterprise's debt has come down in recent years and its cash flows have grown steadily. Meanwhile, its capital spending on organic growth is likely to come down next year onwards as the company focuses on projects valued at nearly $6.1 billion that are already under construction. Overall, that means Enterprise could have more to distribute, and that leaves the company with ample scope to offer investors bigger dividend raises going forward, regardless of where oil prices are. With Enterprise also offering a solid dividend yield of 7.6%, it's one oil and gas dividend stock you may want to own beyond ExxonMobil.
