Best Oil Dividend Stocks

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The oil industry is cyclical, but investing in it can be advantageous for investors looking for income, with oil companies typically paying out a portion of their profits in dividends. These payouts can provide a steady stream of income for investors.

This article focuses on some of the best oil dividend stocks, taking into consideration factors such as dividend yield, dividend growth history and financial strength.

If you're looking to generate income from the oil industry and oil stocks, then these companies could be a great place to start.

5 Best Oil Dividend Stocks

The best energy stocks include pipeline companies as well as oil and gas producers.

1. Enbridge Inc. (NYSE: ENB) 

Enbridge is a pipeline and energy business headquartered in Calgary, Alberta, Canada. It makes it onto the list of top oil dividend stocks with a dividend yield currently around 7%.

It has a long history of dividend payments and growth. It relies on the cash flow from oil pipelines for its dividend payments, although it has been shifting toward cleaner energy projects, with an increased focus on sustainability.

2. Chevron Corp. (NYSE: CVX)

California-based Chevron is one of the world's largest oil and gas companies, with operations extending throughout various parts of the sector. The company's financials are solid, and it has a strong position in the market with projects globally. 

The company has consistently increased its dividend payments for a number of years, and many expect that to continue for the foreseeable future. Chevron's management went all out to protect its dividend payments during the pandemic, even when oil prices plunged, telling CNN that "the dividend is at the top" of its list of priorities, as "shareholders depend on that dividend."

3. Kinder Morgan Inc. (NYSE: KMI) 

Kinder Morgan is a large energy infrastructure business based in Houston, Texas. It specializes in owning and controlling oil and gas pipelines and terminals. It is primarily focused on its oil and gas infrastructure projects, but it has made some inroads in the green energy sector. The company's co-founder and executive chairman previously said, "Fossil fuels will supply the great majority of the planet's energy needs for decades."

Kinder Morgan generates a significant amount of cash each year, which enables it to pay a strong dividend. Its dividend yield is currently over 6%.

4. Devon Energy Corp. (NYSE: DVN)

Independent oil and natural gas exploration and production company Devon Energy is based in Oklahoma City City, Oklahoma, with its primary focus in the Delaware Basin.  

In its first quarter release, the company revealed that oil production reached an all-time high of 320,000 barrels per day, with operating cash flow totaling $1.7 billion and free cash flow reaching $665 million. Devon Energy also announced it had expanded its stock-repurchase program by 50% to $3 billion. DVN has a solid dividend history, with its dividend yield currently sitting at over 8%. 

5. Pioneer Natural Resources Co. (NYSE: PXD) 

Pioneer Natural Resources makes it onto the list because of a 10% dividend yield. While the stock is down around 1.75% in the last 12 months, it did have a strong run between 2021 and 2022 and managed to retain most of those gains despite the dip this year. 

PXD is an independent oil and natural gas exploration and production company with its headquarters in Irving, Texas. The company has a solid track record, and analysts are mostly bullish on the stock.

What are Oil Dividend Stocks?

Oil dividend stocks are the shares of companies operating in the oil and gas industry that pay regular dividends to their shareholders. These stocks can become a solid source of regular income for investors, especially as they normally pay out a higher dividend yield than other types of stocks.

Oil dividend stocks can be a great investment for investors looking for income and who are comfortable and aware of the risks of investing in the oil and gas industry. It is vital to conduct your own research before investing in any stock.

Criteria for Evaluating the Best Oil Dividend Stocks

When assessing dividend stocks, there are various criteria to consider. 

Dividend Yield and Stability

The dividend yield is a percentage of a company's stock price that represents the amount of money paid out as dividends to its shareholders each year. For instance, if a company's stock price is $100 and its dividend yield is 5%, it will pay out $5 per share in dividends annually.

Meanwhile, dividend stability is how consistent a company's dividend payments have been over time. For example, if a company has a track record of stable dividend payments, it's more probable that it will continue to pay dividends in the future, even during times of economic turbulence.

Therefore, when choosing oil dividend stocks, experts aim for a mix of a strong dividend yield and a track record of dividend stability. 

Consistency of Dividend Payouts

When considering oil dividend stocks, investors should take into account the consistency of a company's dividend payouts over time. This metric can indicate financial stability and strength, and a steady stream of dividends is a positive sign.

Given that oil companies are generally seen as strong dividend stocks, there are many that pay consistent dividends and could become a significant part of a dividend portfolio.  

Financial Health and Stability of the Oil Company

Investors should consider the financial health and stability of an oil company before investing in it and adding it as a dividend stock to their portfolio. This quality refers to the company's ability to consistently pay dividends to its shareholders, which is a crucial factor indicating financial strength and stability.

Regardless of whether they are an oil dividend stock or not, investors should assess the financial health and stability of any company they want to invest in. However, for dividend stocks, it is an essential component to focus on as it could determine the ability of the company to pay consistent dividends in the near and potentially long-term future, potentially impacting your investing decision.

Performance and Growth Prospects

When assessing oil dividend stocks, investors should evaluate the company's ability to generate profits and expand its business over time, which is otherwise known as the company's performance and growth prospects. If the oil stock's performance and growth prospects are poor, its ability to pay dividends could suffer. However, if they are positive, investors can be more confident in the possibility of its dividend payments continuing over the long term. It may also provide confidence in an increase in those payments over time. 

Where to Invest in Oil Dividend Stocks

To invest in stocks, oil or not, you need brokerage account. Below are some of the best platforms for investing in oil dividend stocks. 

Yield Doesn’t Always Mean Results

Identifying oil dividend-paying stocks is easy. However, ascertaining which stocks and companies are best for your portfolio and for passive income over the long term is more challenging. Investors need to take into consideration factors such as the company's balance sheet, its performance over the years, and its ability to generate cash in the future. Yes, a high dividend yield is attractive, but if the company's finances aren't healthy, the dividend payments may soon come to a halt. Conducting thorough research is vital to ensure you can build a strong portfolio of dividend-paying stocks. 

Frequently Asked Questions 

Best Oil Dividend Stocks Methodology

The best oil dividend stocks list comprises some of the most well-known names in the industry alongside some lesser-heard names that pay a high dividend yield.