Chris Lau, Kapitall: Looking for energy stocks with a high yield? Check out these oil and gas companies.
High yield from investments can be hard to come by, including those in energy stocks. Interest rates are coming off all-time lows. Treasury bond yields are rising steadily, making it more difficult to find stocks in the energy sector as suitable investments. But two characteristics should interest income investors: strong cash flow and a history of steady dividend payouts.
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First a look at bonds
Recently we’ve seen 10-year and 30-year bond yields rise sharply. The price of these bonds dropped, as illustrated in the chart below.
Click on the interactive charts to see data over time. Sourced from Zacks Investment Research.
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Investors should watch these yields, because a lower bond price will mean higher rates, and this return will compete for that offered from dividend-paying energy stocks.
Energy stocks to consider
Statoil ASA (STO)
pays a dividend that yields 3.94%. Cash flow
over the last 4 years, with a net increase in cash and cash equivalents rising from $54 million in the 12 months ending December 31, 2008 to $2.03 billion in the 12 months ending December 31, 2012.
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The company is strengthening its balance sheet by selling assets in the North Sea for $2.65 billion. This will reduce capital costs for Statoil. And the company is expanding into African waters. Statoil is partnered with
BP p.l.c. (BP)
to invest in wells offshore from Angola.
One thing investors should note is that Statoil pays a dividend annually, not quarterly.