Energy Stocks Could Rally as Iran/Russian Sanctions Kick In: 4 Highest-Yielding Dividend Buys

In the dynamic world of finance, focused investment strategies can yield significant returns, particularly in specific sectors such as energy. With current geopolitical tensions and the implementation of sanctions on oil-rich nations like Iran and Russia, the energy sector is poised for considerable shifts. This article explores why investors are now favoring dividend stocks, particularly high-yield companies within the energy sector, as intriguing buy opportunities arise.

Investors have long recognized the dual advantages of dividend stocks: a consistent income stream and strong potential for total returns. Total return encompasses interest, capital gains, dividends, and distributions accrued over time. For instance, purchasing a stock priced at $20 with an annual dividend of 3% that later appreciates to $22 results in a total return of 13%—10% due to the price appreciation combined with the 3% dividend yield.

Market Context and Prospects for Energy Stocks

In 2024, energy stocks lagged behind the performance of the S&P 500, posting an increase of only 5.72% compared to the index’s remarkable growth exceeding 20%. This underperformance largely stems from declining oil prices, which have plummeted to their lowest levels in four years. However, as geopolitical tensions escalate due to sanctions imposed on Russia and Iran, the sector is expected to receive a much-needed tailwind.

Despite OPEC+’s concerted efforts to bolster production, sanctions against Iran and Russia have recently pushed oil prices higher. With the summer travel season on the horizon, a significant uptick in demand for fuel and energy is anticipated, creating further market opportunities for savvy investors.

Dividend Growth Potential in Energy Stocks

To capitalize on this potential, 24/7 Wall St. screened its energy dividend stock research database, focusing on high-yield energy stocks that not only offer dependable dividends but also substantial upside potential. The selection criteria emphasized companies less reliant on benchmark pricing, which can often be volatile and unpredictable.

Top 4 High-Yield Energy Dividend Stocks

Here are four exceptional high-yield energy dividend stocks worth considering:

1. BP PLC (NYSE: BP)

Current Price: $29.00
Dividend Yield: 6.65%
Market Cap: $74.70 billion
P/E Ratio: 204.29
Target Price (Raymond James): $37

BP operates globally across four segments, including Gas & Low Carbon Energy, Oil Production & Operations, Customers & Products, and Rosneft Activities. Their robust portfolio includes producing and trading natural gas, biofuels, wind and solar power, decarbonization solutions, and electric vehicle charging facilities.

2. HF Sinclair Corp (NYSE: DINO)

Current Price: $30.56
Dividend Yield: 6.66%
Market Cap: $5.66 billion
P/E Ratio: 33.00
Target Price (Morgan Stanley): $50

HF Sinclair is an independent energy company engaged in the production and marketing of light products such as gasoline, diesel, and jet fuel, alongside renewable diesel. The company’s diverse segments echo its commitment to the future of energy, offering refining and renewable solutions.

3. MPLX LP (NYSE: MPLX)

Current Price: $52.52
Dividend Yield: 7.56%
Market Cap: $52.32 billion
P/E Ratio: 12.01
Target Price (Raymond James): $60

MPLX, established by Marathon Petroleum, is a large-cap master limited partnership focused on transporting crude oil and refined products, operating terminals in the U.S. Midwest and Gulf Coast, and natural gas gathering and processing. Their key assets include pipelines, marine terminals, storage caverns, docks, and refinery tanks.

4. USA Compression Partners LP (NYSE: USAC)

Current Price: $25.58
Dividend Yield: 8.33%
Market Cap: $2.96 billion
P/E Ratio: 35.03

USA Compression Partners specializes in providing natural gas compression services to various oil companies and independent producers. Their services encompass centralized natural gas gathering systems and processing facilities, supporting vital applications for crude oil wells.

Conclusion

With the current state of the energy market, driven by geopolitical tensions and anticipated demand surges, high-yield dividend stocks represent lucrative opportunities for income-focused investors. As sanctions against key oil producers come into play, these four selected stocks provide not just an appealing yield but also the potential for capital appreciation, making them worthy of consideration in a diversified portfolio.

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Energy Stocks Set to Surge: Discover 4 High-Yield Dividend Investments Amid Sanctions