If you are looking at the oil sector, you'll want to make sure you consider industry giants that have proven they can withstand the inherent volatility of energy prices.
Two of the best options are ExxonMobil (XOM -2.78%) and Chevron (CVX 0.37%). But another choice also to consider is TotalEnergies (TTE 1.10%), which has taken a drastically different approach to clean energy investment.
All three can be bought for less than $200 a share and investors should be able to comfortably hold them for a very, very long time.
Exxon is the industry giant
With a market cap of around $380 billion, Exxon is the oil industry's 800-pound gorilla. That alone isn't enough to make the stock a buy, but it has the heft to compete with any company in the space. Add in a diversified portfolio, which spans drilling (upstream), transportation (midstream), and refining and chemicals (downstream), and it is pretty close to a one-stop shop in the energy sector.
The value of using this integrated model is that some areas (downstream) can perform well when oil prices are low, effectively helping to offset the pain from areas (upstream) that are likely to be performing poorly. Although this only helps to soften the pain of oil busts, it also helps to make Exxon a more stable company over time.
That is highlighted by the 41 years of annual dividend increases this company has achieved despite operating in a highly cyclical industry. The other key to the company's dividend resilience is its strong balance sheet, with a debt-to-equity ratio of just 0.2 or so. That's the second-best among its closest peers.
But the real reason to like Exxon is probably its long history of being at or near the top of the peer group for return on invested capital, a measure of how well it is using shareholder money. That's the type of company you want to own.
XOM Return on Invested Capital data by YCharts
Chevron has a higher yield and stronger foundation
Chevron and Exxon are very similar companies. Chevron is a bit smaller, with a market cap of "just" $260 billion or so. And while Chevron's dividend record isn't quite as good, it is hard to complain too much about a company that's increased its dividend annually for 36 years. If you are looking at Exxon, you should be looking at Chevron, too.
That said, Chevron shines brighter than Exxon in two important ways. First, Chevron's 4.2% dividend yield is larger than Exxon's 3.9%. And second, Chevron's debt-to-equity ratio is lower at 0.12. That's more income from a financially stronger company.
This is notable, given that both Chevron and Exxon lean on their balance sheets during bad oil markets so they can continue to support their businesses and dividends. For more conservative dividend investors, Chevron could be the better long-term investment choice.
TotalEnergies is preparing today for a different tomorrow
There's one potential drawback to investing in Exxon or Chevron, as both are continuing to focus heavily on the oil business. If you think that the clean energy transition is likely to upend the oil sector, you'll probably prefer a company that's addressing the issue now, like France-based TotalEnergies.
To be fair, BP and Shell have also made a more dramatic shift than Exxon or Chevron in the clean energy direction. But BP and Shell cut their dividends when they announced those plans. TotalEnergies made the same pivot and maintained its dividend.
This isn't to suggest that TotalEnergies is a clean energy stock -- that's just not the case. Its integrated power business only makes up around 7.5% of its business segment operating income. But it is continuing to invest in the business and refine its exposure to oil, refocusing around only its best opportunities.
Essentially, this integrated energy giant is offering investors a hedged bet in the oil space. And it has an industry-leading dividend yield of 5%.
All for less than a grand
Exxon, Chevron, and TotalEnergies are all oil companies you can comfortably own for years to come. That said, there are subtle nuances that are very important among this trio of integrated energy companies. Dig in and you'll likely find one that is of interest and that fits your specific investment needs. The best part is you can get started with as little as $200.
