The clean energy drive has cast a shadow over the oil and gas industry; many major economies have announced their intention to focus on renewable energy sources in the future. While this has helped the carbon-neutral sector to gain mightily over the past year, the oil and gas industry has started to recover with this year’s expected economic recovery. Countries are now most focused on boosting consumer spending and helping businesses to return to pre-pandemic operational levels through tax cuts and fiscal stimulus measures.
With maximizing industrial production is the primary aim of developed countries, oil and gas companies are expected to be the focus. In the meantime, most oil and gas companies are currently researching methods to reduce their overall carbon footprint and are expected to make innovative breakthroughs in the short term.
All this, along with high dividend yields, has bolstered the oil and gas industries’ popularity among income investors amid the Fed’s low interest rate environment. Companies such as China Petroleum and Chemical Corporation (SNP), DCP Midstream, LP (DCP) and Enbridge, Inc. (ENB) have managed complete turnarounds from losses they incurred in the first two quarters of last year and to offer high dividend yields.
China Petroleum and Chemical Corporation (SNP)
SNP operates in the chemical and energy industry in China, through five segments – Exploration and Production, Refining, Marketing and Distribution, Chemicals, and Corporate and Others. The company has independent operations at all stages of the production process, from oil exploration to sale of refined petroleum products. SNP is a subsidiary of the world’s largest oil and gas conglomerate, China Petrochemical Corporation.
Following China’s announcement that it will seek to achieve carbon neutrality by 2060, SNP has been taking steps to reduce its carbon footprint. On November 23 last year, SNP partnered with three top institutions in China to reduce its emissions over time.
SNP’s trailing 12-month earnings yield 9% at the current stock price. It pays $3.30 as dividends annually, yielding 6.5%. The company’s four-year average dividend yield is 8.1%.
SNP reported a record net profit of RMB23.51 billion for nine months ended September 30, 2020. the company’s operating income during the first three quarters was RMB1.55 trillion. Operating income in its fiscal third quarter increased 38.2% year-over-year to RMB26.53 billion.
The consensus EPS estimate of $6.14 for fiscal 2021 (ending December 31, 2021) represents a 31.8% improvement year-over-year. Analysts expect the SNP’s revenues to rise 13.1% from the same period last year to $402.56 billion in 2021.
SNP hit its 52-week high of $59.41 in January last year but declined 55.6% to hit its 52-week low of $39.18 in October 2020. It has returned 23.8% over the past six months.
How does SNP stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
B for Industry Rank
A for Overall POWR Rating.
In the 99-stock Chemicals industry, SNP is ranked #3.
Enbridge, Inc. (ENB)
Headquartered in Canada, ENB is an energy infrastructure company operating through five segments – Liquids Pipelines, Gas Transmission and Midstream, Gas Distribution and Storage, Renewable Power Generation and Energy Services. The company has diverse operations across the U.S. also, revolving around maintenance of pipelines and processing facilities. It also provides ancillary services such as commodity marketing and logistical support.
Last December, ENB started the construction of its line-three replacement project in Minnesota. However, the construction has been contested by the government and is currently being litigated. ENB’s net income has risen 4.3% year-over-year to C$990 million in the third quarter ended September 30, 2020. Its EPS rose slightly from a year-ago value to C$0.49, while its EBITDA has increased 6.6% from the same period last year to C$2.99 billion.
ENB pays $2.45 as dividends annually, yielding 7% at the current share price. Its non-GAAP trailing 12-month earnings yield is 5.2%. Moreover, the company’s four-year average dividend yield is 5.4%.
The consensus EPS estimate of $2.11 for the current year ending December 31, 2021 represents an 8.2% rise year-over-year. Analysts expect ENB’s revenues to rise 5.5% year-over-year in the fiscal second quarter ending June 30, 2021. It is no surprise that ENB is rated “Buy” in our POWR Ratings system. It has an “A” for Trade Grade and Peer Grade, and a “B” for Buy & Hold Grade. It is currently ranked #7 of 53 stocks in the Foreign Oil & Gas industry.
DCP Midstream, LP (DCP)
DCP is a midstream energy asset management company operating in two segments – Logistics and Marketing and Gathering and Processing. The company manufactures natural gas liquids across six states, through more than 44 processing plants and 51,000 miles of natural gas gathering and transmission systems. It has a long-standing partnership with Phillips 66 and Spectra Energy Corporation.
Last September, DCP joined the World Economic Forum’s Global Lighthouse network, reflecting the company’s commitment to scale the fourth industrial revolution. It has capitalized on the ongoing industrial transformation by creating value chains.
DCP’s net income has risen 162.4% year-over-year to $111 million in the third quarter ended September 30, 2020. Its PS has increased 128.9% from the same period last year to $0.46, while its net cash from operating activities has grown 194.5% from the prior-year quarter to $268 million. Its Adjusted EBITDA has improved 10.3% from its year-ago value to $331 million.
DCP pays $1.95 annually, which yields 8.3% on the prevailing share price. The company’s four-year average dividend yield is 14%. Its non-GAAP trailing 12-month earnings yield is 6.9% on the current price. The stock has gained 91.1% over the past six months.
Analysts expect DCP’s EPS to rise 41.5% in fiscal 2020. The consensus revenue estimate of $8.86 billion for the current year ending December 31, 2021 represents a 31.8% rise year-over-year.
DCP’s POWR Ratings reflect this promising outlook. It is rated “Buy”, with an “A” for Trade Grade, Buy & Hold Grade and Peer Grade, and a “B” for Industry Rank. It is currently ranked #16 of 44 stocks in the MLPs – Oil & Gas industry.
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SNP shares were trading at $53.02 per share on Wednesday afternoon, up $0.29 (+0.55%). Year-to-date, SNP has gained 18.88%, versus a 2.52% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.3 High-Yield Energy Stocks with Buy Ratings: China Petroleum and Chemical Corporation, DCP Midstream, and Enbridge appeared first on StockNews.com