Energy stocks are gaining traction amid the fast-paced economic recovery as oil prices hover near two-year highs owing to a resumption of industrial activities globally and continued supply cuts by the world’s major oil producing countries. Renewed investor interest in this industry is evident in the S&P Oil & Gas Exploration & Production Select Industry Index’s 64.3% gains year-to-date, versus the broader S&P 500 index’s 13.1% returns over this period.
Bullish market trends in the energy industry should allow participants to generate substantial cash flows, which, in turn, should help them maintain their high dividend payouts. Because the Fed has signaled that the interest rates will remain at near zero level until late 2023, we think it could be wise to bet high dividend paying energy stocks for a steady stream of income.
China Petroleum & Chemical Corporation (SNP), Kinder Morgan, Inc. (KMI), and Energy Transfer LP (ET) have solid growth prospects and they pay high dividends. So, we think they are attractive bets now.
China Petroleum & Chemical Corporation (SNP)
Based in Beijing, SNP is a petroleum and petrochemical enterprise group that explores for and develops oil fields, produces crude oil and natural gas, and manufactures and sells petroleum products. The company operates mainly through five segments: exploration and production, refining, marketing and distribution, chemicals, and corporate and others.
On March 11, SNP announced plans to accelerate hydrogen energy development to build a world-leading clean energy chemical company. Amid growing demand for sustainable energy, SNP’s new venture should be an excellent growth opportunity in the long term.
SNP’s $3.97 annual dividend yields 7.72% at its current share price. On March 29, the company approved a $1.98 semiannual dividend, payable on July 6. The company’s four-year average yield is 8.46%.
SNP’s operating income for its fiscal first quarter, ending March 31, stood at RMB576.98 billion ($89.04 billion), up 4.1% from the same period last year. Its net profit grew 208.1% from its year-ago value to RMB22.91 billion ($3.53 billion). The company’s EPS increased 190.2% year-over-year to RMB0.15.
Analysts expect SNP’s revenues to rise 62% year-over-year to $121.89 billion in the fiscal period ending September 30, 2021. A $2.99 consensus EPS estimate for the same period indicates a 110.6% improvement year-over-year. SNP has gained 16.9% over the past year and 15.3% year-to-date.
It is no surprise that SNP has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. The stock also has a B grade for Growth, Value, and Stability. Among the 95 stocks in the Energy - Oil & Gas industry, SNP is ranked #8.
To see additional SNP Ratings for Momentum, Sentiment, and Quality, click here.
Kinder Morgan, Inc. (KMI)
KMI in Houston, Tex., is one of the largest energy infrastructure companies in North America. It stores and handles petroleum products and chemicals. The company also provides transportation services for natural gas, gasoline, crude oil, and carbon dioxide. It operates mainly through four segments: natural gas pipelines, products pipelines, terminals, and CO2.
On June 1, KMI acquired Stagecoach Gas Services LLC, which includes four natural gas storage facilities and 3 pipelines. This should enhance the company’s market reach in the Northeastern region.
On March 12, KMI announced the formation of a new Energy Transition Ventures group to analyze and quantify business development opportunities for improved customer outreach.
KMI’s $1.08 annual dividend yields 5.9% at the current share price. On April 21, the company approved a $0.27 quarterly dividend, which was paid on May 17. KMI’s dividend payouts have increased at a 22.5% CAGR over the past three years.
KMI’s revenues increased 67.8% year-over-year to $5.21 billion in its fiscal first quarter, ended March 31. Its operating income grew 4,286% from the year-ago value to $1.89 billion, while its net income improved 589.7% year-over-year to $1.43 billion. The company’s EPS increased 542.9% year-over-year to $0.62.
A $14.14 billion consensus revenue estimate for the current year indicates a 20.8% improvement from the last year. Analysts expect the company’s EPS to come in at $1.20 in the ongoing year, indicating a 36.4% rise year-over-year. Moreover, KMI surpassed the Street’s EPS estimates in three of the trailing four quarters. Shares of KMI have gained 30.7% over the past six months, and 33.8% year-to-date.
KMI has a B rating for the Growth component in our proprietary POWR rating system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree. It is ranked #23 in the Energy - Oil & Gas industry. Click here to view additional KMI Ratings for Momentum, Quality, Value, Sentiment, and Stability.
Energy Transfer LP (ET)
ET has been a midstream energy leader in the United States for nearly 25 years. The Dallas, Tex.-based company engages in transportation and storage for natural gas, crude oil and refined products. ET’s segments include intra-state transportation and storage, inter-state transportation and storage, midstream, NGL and refined products transportation and services, crude oil transportation and services, investment in Sunoco LP, and investment in USAC.
On June 1, ET priced a public offering of 900,000 series H preferred stocks at $1,000 per unit. The company raised $900 million in proceeds through the offering, which it plans to use to reduce its debt burden and for funding general partnership expenses.
On April 22, ET announced a quarterly distribution of $0.1525 per common unit for the first quarter, ended March 31, 2021. The company also announced quarterly cash distributions of $0.46, $0.48 and $0.48 per Series C, D and E Preferred Units respectively, paid on May 17.
ET’s $0.61 annual dividend yields 5.54% at its current price. On April 22, the company approved a $0.15 quarterly dividend, which was paid on May 19. ET’s four-year average dividend yield is 12.45%.
ET’s revenues increased 46.2% year-over-year to $17 billion in its fiscal first quarter, ended March 31. Its income from continuing operations grew 6,570.5% from its year-ago value to $4.07 billion. Its net income came in at $3.64 billion, indicating a 477.7% rise year-over-year. The company’s net income per limited partner unit increased 478.1% year-over-year to $1.21.
The Street expects ET’s revenues to increase 71.1% year-over-year to $66.63 billion in the current year. Its EPS is expected to increase 891.7% year-over-year to $1.9 in the current year.
ET has gained 66.8% over the past six months to close yesterday’s trading session at $10.94. The stock has gained 78.2% year-to-date.
ET has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. ET has an A grade for Growth and Value. It is ranked #14 in the same industry. To see more of ET’s component grades, click here.
SNP shares were unchanged in after-hours trading Wednesday. Year-to-date, SNP has gained 21.59%, versus a 13.77% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
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