Everybody likes getting paid.
And since ExxonMobil (NYSE:XOM) is one of the most profitable companies in the world, it stands to reason that it pays a great dividend. Since the merger that created the megacompany in 1999, its annual dividend has more than tripled:
However, that doesn't mean ExxonMobil is the best dividend payer in the oil patch. With that in mind, we asked three of our energy experts to name a company with better dividends than ExxonMobil, and they came back with three very different companies that do very different things, in ConocoPhillips (NYSE:COP), ONEOK (NYSE:OKE), and HollyFrontier (NYSE:HFC).
Here's what our experts had to say:
ONEOK owns 41% of and is the general partner of ONEOK Partners (NYSE:OKS), a master limited partnership that owns one of the best-located natural gas and natural gas liquids collection, processing, storage, and distribution systems in the U.S. As a midstream operator, ONEOK (through ONEOK Partners) is primarily about moving the product to market, and letting other companies take on the potential risk (and reward) of finding and producing natural gas and natural gas liquids.
The company does generate about one-third of its income from commodities (mainly NGLs), but uses hedges to limit the downside for the majority of its sales here. When prices shoot up, these hedges can limit profits, but they serve an important role in minimizing losses when oil prices collapse.
For income seekers, ONEOK is built to pay for the long term. The company just increased its dividend by 3%, and will pay $2.42 per share on an annualized basis. That's good for nearly a 6% yield at recent prices, 90% higher than the yield on ExxonMobil stock:
Best of all, the nature of its business should produce long-term and relatively predictable income from its contracts. That will likely lead to increasing payouts for years to come, and at what I think should be a higher rate of dividend growth than ExxonMobil is likely to produce.
Jason Hall owns shares of Oneok. Matt DiLallo owns shares of ConocoPhillips. Tyler Crowe has no position in any stocks mentioned. The Motley Fool recommends Oneok and Oneok Partners. 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.