Welcome back to the Millionaire mindset blog where you learn about different stocks, ETFs, and investing techniques.
Do Energy ETFs pay dividends?
The Best Energy Dividend Stocks offer investors a steady income stream, despite falling stock prices. Clearway Energy, Algonquin Power and Utilities, and NextEra Energy Partners all offer yields above four percent. All five have declined over the past year, but they still offer attractive entry points for long-term investors. In addition, the year-to-date decline in their stock prices is less than the market's overall decline, which makes these stocks attractive to dividend investors.
XLE - Energy Select Sector SPDR Fund
XLE - Energy Select Sector SPDRS fund is a market-cap-weighted exchange-traded fund for the energy industry. The fund is a diversified package of energy stocks with nearly $12 billion in assets. Its investment objective is to provide investors with exposure to the energy sector, including the largest oil and gas companies in the world. Investors can invest in the fund for the income it generates and for tactical overlay purposes.
Professional investors prefer the fund for several reasons. The fund is highly liquid, with over 15 million shares traded every day. The bid-ask spread is a penny per share. It is also easy to short, and its annual operating costs are only 0.2%. Professional investors will probably also prefer this fund. However, investors should keep in mind that there is no guaranteed return. If you are unsure of the fund's performance, it is always wise to read some reviews online. The Motley Fool's stock advisor has consistently beaten the market by 3X or more.
DVN - Devon Energy Corp
Although DVN - Devon Energy Corp. shares are fairly cheap, investors should not get carried away with its current price. The company is only worth about a quarter of its current market value, and that price may drop significantly if oil prices fall. Currently, the stock is trading at around 2.2 times free cash flow yield, which gives it a 20%-40% upside potential. The company also has a strong dividend yield of more than 7%, based on its most recent payout of $1.27 per share. The dividend is especially attractive to income investors, so if you can get a bit of the dividend now, you may be in for a treat.
This stock has performed quite well this year and went long during the oil price crash. While it's unlikely to continue growing at such a fast pace, there's still plenty of room for further gains. If oil prices stay above $90 per barrel, the stock could rise even higher. The company also pays fat dividends, so investors will benefit from lower borrowing costs and a focus on maximizing shareholder returns.
MPC - Marathon Petroleum Corp
Marathon Petroleum Corp. is one of the top energy dividend stocks. The company operates the largest refinery system in the United States and is a leader in downstream energy production. The company has benefitted from rising oil and gas prices and a resurgence in the renewable energy sector. The company is expected to increase its cash returns to shareholders by 50% by 2021. The stock yields 3%, but investors should be wary of the dividend hike rumors that plague the company.
Investors should be aware that MPC is about to go ex-dividend. The ex-dividend date is the first business day before the record date, which determines which shareholders are eligible for the dividend. If you purchase after the ex-dividend date, your shares will be paid late. Currently, the dividend is scheduled to be paid on the 10th of June. For investors who are on the fence about this company, it's best to wait until the ex-dividend date to purchase.
ICLN - iShares Global Clean Energy ETF
The iShares Global Clean Energy ETF (ICLN) has many promising companies, but it does suffer from a poor performance over the last 12 years. However, investors will find that global diversification helps balance risks and increases income from the alternative energy sector. The fund also trades in the Chinese and New Zealand markets, which account for 40% of global renewable capacity. With that said, the fund is an excellent long-term buy.
The ETF's main objective is to track the S&P Global Clean Energy Net Total Return Index - USD. It also includes companies that develop technology and equipment related to clean energy. The fund's methodology is determined by an index committee that selects companies based on market cap. The index is reconstituted semi-annually. The methodology will change on April 19, 2021.
This is not financial or investing advice advice. Always do your own research before investing. This is for educational purposes.