Energy stocks are on the rebound.
… the XLE (the energy market ETF) up 77%
… Exxon (XOM) up 101%
… Chevron (CVX) up 115%
It was only a matter of time before energy stocks, crushed by the pandemic and dirt cheap, were being scooped up by Wall Street and patient investors.
At the same time, crude oil prices skyrocketed 200% to 300% off their lows of last summer.
The early success of the vaccine roll-out has the markets frothing over the anticipated jump in land, air, and sea travel.
And everyone knows the big push for green energy by the Biden Administration isn’t going to replace fossil fuels overnight.
These trends make energy stocks a great play for income investors.
The good news for income investors a number of energy firms with stable cash flows have survived and are now thriving … and paying big dividends.
Here are 3 high-yielding, dividend stocks to play the energy rebound.
Antero Midstream (NYSE: AM)
Energy stocks are shaping up to be a great investment for income investors looking for a high-yield play. One of the biggest names in the sector right now is Antero Midstream Corp. The company was founded by Antero Resources Corp (AR) and specializes in midstream natural gas processing, storage, and delivery. Its operations are based in Ohio Valley and West Virginia.
AM stock has managed to keep its revenue streams flowing through the pandemic thanks to its long-term, fixed-fee service agreements. This enabled the company to sustain its dividends which have been paid for the last 24 consecutive quarters. Antero recently announced that its dividend yield will be set at 10% this year or $0.90 per share this year.
In terms of its finances, AM is well-poised to generate some strong returns. In the previous quarter, the company reported a net income of $76 million which was up from its net loss of $144.6 million last year. Free cash flow (FCF) was also up 223% YOY at $135 million. Antero recently signed onto a drilling partnership which will help spread the risk and expenses while adding to its bottom line in the long-haul.
Hoegh LNG Partners (NYSE: HMLP)
Another name that income investors should set their sights on is Hoegh LNG Partners. Like AM, Hoegh’s long-term contracts helped the company remain stable during the pandemic. The limited partnership owns, operates, and acquires floating storage and regasification units (FSRUs), liquefied natural gas (LNG) carriers, and other LNG infrastructure assets under long-term charters.
Hoegh’s allure lies in its dividend yield which is currently 11.07%. However, this will be higher depending on the investor’s tax bracket. Investors in the 24% tax bracket can benefit from a 9.5% after-tax yield while those in the 32% tax bracket will have an after-tax yield of 10.6%. In 2021, Hoegh reported EPS of $1.53, and given its long-term contracts, it is unlikely that this value will change in the coming years. Over the past year, revenue income and cash flows saw little movement as well. In today’s volatile economy, safe stocks like HMLP are hard to come by.
Hoegh LNG Partners is set to have a good run this year. The LNG sector has remained strong in the midst of the pandemic and HMLP stock has been on an upward trend going from $10 to $16 in the past 12 months. With a strong dividend yield and long-term tailwinds, this energy stock is a great buy.
MPLX LP (NYSE: MPLX)
MPLX is a limited partnership company that operates midstream infrastructure and logistics assets in the natural gas space. Although the energy sector, as a whole, experienced a massive dip at the onset of the pandemic, the midstream portion was left relatively unscathed due to stable cash flows. Nevertheless, the low volumes of crude oil that were transported did hurt revenues in the sector. As a result, MPLX saw a dip in revenues but rising natural gases have put the stock on the path to recovery.
In addition to this, MPLX has taken actionable steps to maintain its financial stability. Over the course of the year, the company adopted stringent cost-cutting strategies and was more conservative with capital expenditures. This enabled MPLX to free up cash flow and grow its EBITDA- although revenue was still down by roughly 6% from the prior year. However, with enough cash to cover dividends, this energy stock is a good buy in a tumultuous market.
MPLX pays an annual dividend of $2.57 per share and offers a yield of 10.67%. With energy prices on the rise now, the growth potential of this stock is hard to ignore.