If you’re looking for ways to protect your portfolio from volatility, consider dividend stocks. Many energy stocks stand out for generating significant cash flow and often returning a portion of that cash to shareholders through attractive dividends.
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These are companies that return part of their profits to shareholders through regular payments. Companies with strong cash flow are often better able to maintain and increase their dividends over time. In fact, investors may want to consider these three.
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Let’s start with ConocoPhillips (NYSE: COP), one of the largest oil and gas companies in the world. The company pays a quarterly dividend of 84 cents per share, or $3.36 per year. This gives the stock a dividend yield of about 3%.
Before ConocoPhillips reports its second-quarter results on August 6, Wells Fargo reiterated a buy rating on the stock and set a price target of $183. The firm believes ConocoPhillips is in a strong position because of its efficient operations and ability to handle changes in oil and gas prices. The analysts expect the company to meet its production goal of about 2.2 million barrels of oil equivalent per day.
Although lower natural gas prices could hurt parts of the business, the analyst believes stronger oil prices will help balance out those challenges. The firm also expects for ConocoPhillips to continue generating strong cash flow, which could support future dividend increases.
Energy Transfer
There’s also Energy Transfer (NYSE: ET), a company that owns and operates a large network of energy pipelines and infrastructure.
Energy Transfer operates about 140,000 miles of pipelines and pays investors a quarterly distribution of 33.75 cents per unit. That equals $1.35 per year and gives the stock a dividend yield of approximately 6.8%. Jefferies analysts reiterated a buy rating on Energy Transfer and gave the stock a price target of $23.
The analysts also believe Energy Transfer could benefit from continued demand for natural gas, natural gas liquids, and oil.
Another key reason why analysts like Energy Transfer is its strong income potential. The company generates steady cash flow from its pipeline business, which is less dependent on daily energy price changes compared with oil producers.
Chevron
There’s also Chevron (NYSE: CVX), which pays a quarterly dividend of $1.78 per share, or $7.12 annually. The stock currently offers a dividend yield of about 3.9%.
Jefferies analysts reiterated a buy rating on Chevron and set a price target of $216, noting that Chevron’s business is improving after facing several challenges earlier in the year. These included production issues in Kazakhstan, weather-related disruptions, and uncertainty caused by conflicts in the Middle East.
The analyst expects Chevron’s oil and gas production to recover and believes the company’s refining business will also perform well. Higher refining profits and strong operations could help Chevron generate significant cash flow.
The firm added that Chevron could produce about $18.2 billion in operating cash flow during the quarter. Strong cash generation gives the company flexibility to maintain its dividend and continue investing in future growth.
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Dividend stocks can be appealing to investors who want regular income and companies with strong fundamentals, especially during periods of high volatility and uncertainty.
ConocoPhillips, Energy Transfer, and Chevron all offer attractive dividend payments and operate in the energy sector, which continues to play an important role in the global economy.
These three companies have built large-scale operations and continue to focus on returning capital to shareholders while investing in future growth.
For income-focused investors, the appeal of these energy stocks goes beyond their current dividend yields. Their ability to generate consistent cash flow and maintain shareholder returns could make them worth considering as part of a diversified portfolio.
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