The energy industry is transitioning from fossil fuels to renewables. These stocks straddle both worlds.
Renewable energy is gaining traction; however, its shortcomings allow oil and natural gas to remain in the mix.
Renewable sources of energy, such as wind and solar, are gaining traction as the world seeks to reduce carbon emissions. But at the moment, the globe doesn’t have nearly enough renewable electricity generation – or the battery storage to make grids more reliable – to make full electrification possible.
That means oil and especially natural gas will remain in the mix for some time. So, energy investors may want to have a portfolio that contains both traditional oil and gas companies as well as pure-play renewable energy companies.
“Long-term increases in energy demand will provide a broad tailwind for the sector, but the energy mix is accelerating toward renewables, providing different growth opportunities and a stratification of risk,” says Kavan Choksi, business management and wealth consultant at KC Consulting.
This list of 11 energy stocks straddles both fossil fuels and renewables, and most of these companies pay a generous dividend to shareholders as well:
| ENERGY STOCK | FORWARD DIVIDEND YIELD (AS OF MAY 31) | MARKET CAPITALIZATION (AS OF MAY 31) |
| Brookfield Renewable Corp. (ticker: BEPC) | 4% | $5.8 billion |
| NextEra Energy Inc. (NEE) | 2.6% | $148.6 billion |
| TC Energy Corp. (TRP) | 7% | $40 billion |
| Williams Cos. Inc. (WMB) | 6.3% | $34.9 billion |
| NOV Inc. (NOV) | 1.4% | $5.5 billion |
| Marathon Petroleum Corp. (MPC) | 2.9% | $44.5 billion |
| Cheniere Energy Inc. (LNG) | 1.1% | $34 billion |
| MPLX LP (MPLX) | 9.3% | $33.4 billion |
| Diamondback Energy Inc. (FANG) | 7.2% | $23 billion |
| TotalEnergies SE (TTE) | 5.1% | $138.8 billion |
| Vestas Wind Systems A/S (VWDRY) | – | $28.6 billion |
Brookfield Renewable Corp. (BEPC)
Brookfield operates renewable power platforms, with a portfolio of hydroelectric, wind, solar and storage facilities in North America, South America, Europe and Asia. Its businesses include renewable power and transition, infrastructure, private equity, real estate, and credit and insurance solutions.
“As a leading global power producer, the company is continuing to deliver a variety of clean energy solutions effectively and efficiently, from hydropower, wind and solar to energy storage,” Choksi says. It also has a 4% forward dividend yield.
NextEra Energy Inc. (NEE)
With a market capitalization of $147 billion, NextEra Energy is the world’s largest renewable energy company. Its regulated utility segment engages primarily in the generation, transmission, distribution and sale of electric energy in Florida. Another segment produces electricity from renewable sources, including wind and solar.
In addition to solar and wind generation, NextEra is involved in battery storage and green hydrogen.
“The company is significantly investing in American infrastructure, and with the U.S.’ desire for more American-made and -based solutions and jobs, it’s no surprise NextEra Energy is seeing success,” Choksi says.
TC Energy Corp. (TRP)
TC Energy operates nearly 58,000 miles of natural gas pipeline and more than 650 billion cubic feet of natural gas storage in Canada, the U.S. and Mexico. It also operates a crude oil pipeline network supplying oil from Alberta, Canada, to Illinois, Oklahoma, Texas and the Gulf Coast.
The company also has a renewable energy solutions business and investments in seven power-generation facilities.
“The company’s wide variety of pipelines and power facilities have powered North America for over six decades, and its commitment (to) and (pursuit of) more renewable and sustainable sources is not only appealing to the current clean energy discussion but is backed by a team with immense experience and knowledge on their side,” Choksi says. It also happens to pay a 7% dividend yield.
Williams Cos. Inc. (WMB)
The world can’t just switch to renewable energy, such as that produced by solar and wind farms, overnight because there isn’t enough storage capacity online to even things out when the wind isn’t blowing or the sun isn’t shining.
That means natural gas will stick around as a transition fuel. Within the U.S., natural gas is often transported by pipeline, and Williams operates one of the largest pipeline networks in the nation. Meanwhile, the company also has a goal of a 56% reduction in greenhouse gas emissions by 2030.
Williams regularly raises its annual dividend and has a forward dividend yield of 6.3%.
NOV Inc. (NOV)
In an era of rising popularity of environmental, social and governance, or ESG, risk assessment for companies, even hydrocarbon producers have begun to inventory things they say help reduce emissions. NOV, which provides equipment and technology to the upstream oil and gas industry, has historically recycled approximately 60% of the total waste it generates.
The company has also introduced products that reduce the emissions profile of its customers’ oil and gas operations.
NOV is smaller than some of the other companies on this list, at $5.5 billion, but it seems well positioned to supply the renewable energy economy as it designs, builds, installs and supports renewable energy equipment and technology, with a focus on wind and solar.
Marathon Petroleum Corp. (MPC)
Marathon Petroleum is a $45.5 billion independent oil and gas refiner focused primarily on the U.S. Midwest, West Coast and Gulf Coast regions. It refines crude oil and other feedstocks, purchases ethanol and refined products for resale, and distributes the products using barges, terminals and trucks owned or operated by the company. Its Speedway retail business segment sells transportation fuels through more than 2,700 stores.
The company converted a petroleum refinery into a renewable diesel facility that became fully operational in 2021 as the second-biggest endeavor of its kind in the U.S.
Related:
Cheniere Energy Inc. (LNG)
The war in Ukraine exposed Europe’s dependence on Russian natural gas. As Europe weans itself from that source, it has been importing more natural gas from the U.S. Amid the boom, Cheniere Energy – which operates liquefied natural gas terminals and liquefaction projects – is the biggest U.S. exporter.
The company has one of the biggest liquefaction platforms in the world, with facilities in Louisiana and Texas, and it says it is also pursuing liquefaction expansion opportunities.
Over the last four quarters, Cheniere beat consensus estimates for revenue and earnings per share, according to Zacks Equity Research. It also raised its quarterly dividend in the latter part of 2022 and has kept that payout stable since.
MPLX LP (MPLX)
MPLX is a master limited partnership formed by Marathon Petroleum to own and operate midstream energy infrastructure and logistics assets and distribution fuel services. It has a network of crude oil and refined products pipelines as well as crude oil and natural gas gathering systems, plus other assets.
And like Cheniere, the company has been increasingly allocating its growing free cash flow to dividends and share buybacks. Unlike Cheniere, MPLX currently has a 9.3% forward dividend yield.
Diamondback Energy Inc. (FANG)
Like Cheniere and MPLX, Diamondback has exposure to the Permian Basin, a prolific oil- and gas-producing area in West Texas and New Mexico. Diamondback focuses on acquiring, developing, exploring for and exploiting unconventional onshore oil and natural gas reserves in the West Texas part of the basin.
The company generated $646 million of free cash flow in the first quarter and said it would return $485 million of that to shareholders. Diamondback pays a 7.2% dividend yield currently.
TotalEnergies SE (TTE)
TotalEnergies is a low-cost oil producer, giving it extra margin. With a $138.8 billion market cap, its large size also means that it’s much better prepared to weather the ups and downs of the cyclical energy market. And, as the world shifts toward renewable energy, so does this European integrated oil and gas producer.
The French company is broadening its portfolio of energy generation, including developing large solar and wind farms. But it isn’t giving up on fossil fuels anytime soon. In December, the company announced that it and its partners had won a new exploration license in a Brazilian petroleum-bearing basin.
TotalEnergies pays a 5.1% forward dividend yield and has a five-year average yield of 6.5%.
Vestas Wind Systems A/S (VWDRY)
This wind turbine manufacturer stands to benefit from the offshore wind boom in the U.S., as the Biden administration pushes for 30 gigawatts of offshore wind generation capacity by 2030. The company also makes wind turbines for onshore wind farms, where the U.S. has been a significant market for years.
This year, amid a flurry of international projects, Vestas has also announced it will supply turbines for projects in Minnesota, North Dakota and Iowa.
