Top Three Energy Shares to Invest in During November
Top Three Energy Shares to Invest in During November
Referencefully speaking, the energy sector isn't for the timid investors. The prices of oil and natural gas are notorious for their fluctuation, which in turn impacts the sentiments towards energy stocks such as Chevron (CVX -0.32%), Enterprise Products Partners (EPD -1.01%), and Devon Energy (DVN 0.13%). During the onset of November, every one of these energy giants has something intriguing to offer as Wall Street begins its month-long journey.
Chevron: The Foundation of Stability
When examining the integrated energy colossus, Chevron, don't concentrate on oil. Instead, consider diversification and financial robustness. That is the foundation upon which this company is constructed. Chevron's business encompasses operations in the upstream (oil and gas production), midstream (pipelines), and downstream (chemicals and refining). The varieties of operations in this industry not only differentiate but also act as a cushion for the volatility that the commodity-driven sector is known for. This resilience has aided Chevron in increasing its dividend annually for a remarkable 37 consecutive years, despite the sector's volatile nature.
But the aforementioned fact isn't the sole source of its impressive track record. Another critical factor is Chevron's financial health. The company's debt-to-equity ratio at the end of the second quarter stood at an impressively low 0.15 times, outperforming its closest peers and most in the industry. This financial strength allows Chevron to amplify the use of leverage during energy downturns to support its business and its dividend, making it a lucrative choice for income investors seeking diversified exposure to the oil and gas sector while ensuring ample sleep.
2. Enterprise Products Partners: The Sweet Spot of Steadiness
Though you could choose to acquire energy exposure in an alternate manner, focusing on the one segment of the industry that is comparatively less volatile: the midstream. Firms like Enterprise own the energy infrastructure, which comprises pipelines, storage, transportation, and processing assets. These assets are essential in the transportation of oil and natural gas across the globe and see increased demand in both prosperous and challenging energy markets. Enterprises generate revenue through service fees, which helps to insulate its cash flow from extreme energy price volatility that would negatively impact energy producers.
This master limited partnership (MLP) (Enterprise Products Partners) can sustain its massive 7.3% yield effortlessly. In fact, distributable cash flows have enough leeway to cover the distribution 1.7 times over, providing a significant cushion against adversity before a reduction would be on the table. This durability aids in illustrating how Enterprise has increased its distribution for an impressive 26 consecutive years. If you seek energy exposure but prefer investments that exhibit a minimal degree of excitement, Enterprise Products has you well-covered.
3. Devon Energy: The Thrill of Change
Should you believe that November will boast an oil price surge, the best method to maximize profit will be to invest in a pure-play producer like Devon Energy, which maintains both a strong top and bottom line that fluctuates directly with oil and natural gas prices. This makes Devon Energy an exhilarating stock choice, as its price tag tends to follow the trajectory of oil and natural gas prices (and plummets with energy price decreases, as well). If you think 'adrenaline' describes your investment profile, Devon Energy might be the pick for you.
That said, this stock introduces a curveball in the form of its variable dividend policy that is directly tied to the company's profitability. Consequently, the 5.1% dividend yield isn't guaranteed and is subject to variations from quarter to quarter. This policy may not resonate with conservative dividend investors, but the addition of a variable dividend ensures that shareholders reap increased dividend payments during periods of soaring oil prices. This dividend reward might function as a hedge against rising energy expenses in real-world terms.
Three Ways to Tackle the Energy Sector in November
Many investors view the energy sector as a homogenous entity. However, as November begins, you may find individual companies like Chevron, Enterprise, and Devon worth considering due to their unique attributes, making each an appealing choice for different reasons. If you are on the lookout for energy stocks presently, you might discover at least one worth adding to your portfolio.
- For investors seeking a balance between stability and potential returns, Chevron's diversified operations and strong financial health make it an attractive option in the energy sector, offering a reliable dividend growth despite market volatility.
- Enterprise Products Partners, with its focus on midstream assets, provides a more stable investment option within the energy sector due to its revenue generation through service fees, which helps insulate its cash flow from extreme energy price volatility.