The markets have been volatile for quite some time, and no one really knows when this madness will end. Oil prices have been fluctuating wildly. On one side, the European debt crisis threatens to pull down world economies even further, while on the other side threats to Middle East crude oil may cause an unprecedented rise in oil prices.
Investors are caught in between, especially when it comes to oil stocks. On one end of the spectrum, oil companies are taking advantage of rising energy prices and, hence, increasing production, while on the other end, a rerun of last August's bear market is capable of unnerving even savvy investors. In short, the unpredictability is too big a factor to ignore.
The way out
So where does an investor stand who wants to invest in oil without taking too many risks? The answer lies in dividend stocks.
A steady stream of income is a time-tested way of getting the better of volatility in the markets and uncertainty in returns. Here are four dividend stocks you should be looking into and that I believe should help you beat the markets in the long run:
Global offshore drilling is steadily gathering steam with the African, Australian, and Asian markets leading the way. According to analysts, the offshore rig demand is estimated to increase by 12%-19% in two years. This is where offshore driller Seadrill is a runaway winner. Fellow Fool Travis Hoium also argues that this driller's focus on deepwater has it positioned better to create value in the long term. A growing demand for the company's drilling units has seen available rigs fall substantially, and this trend should continue in the future.
This company has already been generating healthy returns, and now with a dividend yield of 9%, this has been among the most generous in the oil services industry. A sound business and a very good dividend yield. In short, a value stock.
- Add Seadrill to My Watchlist.
Cheniere Energy Partners
Since they are not taxed at the corporate level, MLPs can afford to gain access and operate premium assets, which integrated oil companies find costlier. And that's where Cheniere comes in. Along with its parent company, Cheniere Energy
- Add Cheniere Energy Partners to My Watchlist.
The company successfully transitioned itself and took a more growth-oriented approach that should see big returns in the future. Production has been steadily increasing and has been encouraging so far. With a dividend yield of 8.3%, investors should definitely have a look at this safe stock.
- Add Enerplus to My Watchlist.
Penn West Petroleum
- Add Penn West Petroleum to My Watchlist.
Foolish bottom line
While these stocks are among the best dividend payers in the oil and gas industry, one's search shouldn't end here. But dividend payers definitely counteract the risk when compared to nondividend stocks. However, if you're looking for more ideas, The Motley Fool has created a new special oil report titled "3 Stocks for $100 Oil," which you can download today, absolutely free. In this report, Fool analysts cover three outstanding oil companies. To get instant access to the names of the three oil stocks, click here -- it's free.
Fool contributor Isac Simon does not own shares of any of the companies mentioned in this article. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.