3 Energy Stocks Offering Generous Yields To Investors

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.

[Read more from Kapitall:  Online Gambling Stocks: Will the US Cash In?]

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.

<p>Your browser does not support iframes.</p>

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 grew steadily 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.

[Read more from Kapitall: Online Gambling Stocks: Will the US Cash In?]

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) and ConocoPhillips (COP) to invest in wells offshore from Angola.

One thing investors should note is that Statoil pays a dividend annually, not quarterly.

Meanwhile BP is trading close to a 52-week low, and offers a dividend yielding a generous 5.23%. The oil spill in the Gulf of Mexico continues to bring a negative overhang on its stock price. The expiration for compensation paid to victims of the spill could be extended past April 2014. This is creating uncertainty that is hurting shares, but gives investors an opportunity to enter the stock for the long term.

And ConocoPhillips pays a dividend yielding 4.18%. The company is joining Statoil and Eni SpA (E) in exploring parts of the Barents Sea – Norway recently invited oil companies to bid for an area with an estimated 1.9 billion barrels of oil equivalent.

<p>Your browser does not support iframes.</p>

 

Written by Chris Lau, Kapitall Contributor. 

Disclosure: Author has a long position on BP.

null

If you liked this article you might like

How to Invest in Oil

How to Invest in Oil

Video: 5 of the Biggest Losers From the New Tax Code

Video: 5 of the Biggest Losers From the New Tax Code

Live From NAPE: Oil and Gas Drillers Excited About $60 Oil

Live From NAPE: Oil and Gas Drillers Excited About $60 Oil

A Regular Winning Trade Becomes Roadkill in Market Meltdown

A Regular Winning Trade Becomes Roadkill in Market Meltdown