From an investor's standpoint, there's nothing flashy about the oil and gas business. Crude oil and natural gas are extracted from the ground, transported via pipelines, and then refined into the energy and products that make modern life possible.
The straightforward (maybe even boring?) aspect of this process, as well as the importance of these energy sources, has made the leading companies in this industry fantastic dividend stocks. Investors can enjoy the steady income flowing into their portfolios, delivering peace of mind that helps them sleep well at night.
These three energy-related companies may be boring for investors, but you'll want to check them out anyway.
Image source: Getty Images.
1. Energy Transfer
Investing in pipeline stocks is about as dull as it gets, but they are equally reliable for investment income. Energy Transfer (ET 1.68%) is one of the largest midstream companies in the world. It owns several subsidiaries and stakes in other public companies. Energy Transfer operates thousands of miles of pipelines that transport oil and gas resources from production sites to retail, refining, and export hubs.
NYSE: ET
Key Data Points
Energy Transfer generates roughly 90% of its earnings before interest, taxes, depreciation, and amortization (EBITDA) from contracted fees. Since the energy sector practically never shuts down, the business generates very steady revenue and profits. As a master limited partnership, it can pay large distributions (dividends), resulting in the stock's 7.3% yield. Owning MLPs requires U.S. investors to fill out a special K-1 tax form, but it's hard to beat the income they can generate.
2. NextEra Energy
Renewable energy has grown for decades, and it's still one of the best growth opportunities in the energy space. NextEra Energy (NEE 1.63%) is one of the world's leading producers of wind and solar energy and operates Florida Power & Light, an electric utility servicing more than 12 million people. The stability of the utility business and growth in renewable energy have made NextEra Energy a fantastic dividend stock.
NYSE: NEE
Key Data Points
NextEra Energy offers a solid starting yield of almost 2.6% and has increased its dividend for 30 consecutive years. Those increases add up over a decade or two, and NextEra should be able to continue building on its impressive track record. The dividend only costs about 57% of earnings, and analysts expect 8% annualized earnings growth ahead.
3. ExxonMobil
As an integrated oil major, ExxonMobil (XOM 2.06%) operates across various segments of the oil and gas industry. It explores for and extracts oil and gas resources from the ground, refines them, and sells them to the market. It's also one of the world's largest energy companies. ExxonMobil's 42 consecutive years of annual dividend increases underscore its steady performance. Shares yield 3% right now.
NYSE: XOM
Key Data Points
ExxonMobil's financials can fluctuate with the energy market, but the company's massive size and strong balance sheet continue to act as a safety net for the dividend. The company's recent blockbuster acquisition of Pioneer Natural Resources more than doubled its acreage in the lucrative Permian Basin, cementing long-term growth that should continue to translate to dividend income for the company's shareholders.
