Forget Occidental Petroleum — Buy This Magnificent High-Yield Energy Stock Instead
2024-09-26 12:10:00
Oil prices have been a bit volatile of late, sending share prices of Occidental Petroleum (NYSE: OXY) down 25% from their 52-week highs. The stock’s yield is a mediocre 1.7% despite the significant price drop. Most energy stock-focused investors, and particularly income-oriented investors, will be better off with Enterprise Products Partners (NYSE: EPD) and its hefty 7.1% distribution yield. Here’s why.
Occidental Petroleum is a perfectly fine energy company
Most investors have heard the names ExxonMobil and Chevron, which both rank among the largest integrated energy companies on the planet. Integrated energy companies have operations that span from the upstream (energy production) through the midstream (pipelines) and on into the downstream (chemicals and refining). That diversification of operations helps to soften the peaks and valleys inherent to the highly volatile energy sector.
Occidental Petroleum wants to compete with these giants.
For proof, just look at the graph above comparing the price performance of West Texas Intermediate (WTI) crude, a key U.S. oil benchmark, with the price performance of Oxy and Enterprise. Oxy fell right along with WTI while Enterprise just kept on trucking along. Conservative investors and those looking to live off of their dividends will likely be much better served by owning Enterprise.
Oxy isn’t a bad company, but it is a volatile one
Occidental Petroleum bit off more than it could chew with the Anadarko deal, but it appears to have learned a lesson after being forced to cut its dividend. Still, it is an energy company that is focused on growth in a highly volatile industry. It isn’t for the faint of heart even after a 25% stock price decline. Most investors will probably be happier owning a boring income stock like Enterprise if they want exposure to the energy sector today.
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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and Chevron. The Motley Fool recommends Enterprise Products Partners and Occidental Petroleum. The Motley Fool has a disclosure policy.
Forget Occidental Petroleum — Buy This Magnificent High-Yield Energy Stock Instead was originally published by The Motley Fool
