3 Oil & Gas Dividend Stocks to Own for a Lifetime of Income

Stocks to buy

People generally have very split opinions on the oil & gas sector. This is for various reasons. But one key argument devolves into whether or not there is going to be a downturn in this space.

Now, I’m not going to suggest that all oil and gas companies can’t move independently, and that these company simply follow trends in the commodities market. There are many oil and gas companies (or companies that are closely tied to that industry) that have been delivering very solid gains decade after decade, and will likely continue to do exactly that going into the future. These stalwarts have weathered countless storms and emerged stronger.

Even if you’re not an income investor, owning some of these stocks is a good idea, for those looking to add a buffer to your portfolio and let these positions compound over the years. A well-diversified portfolio should have exposure to various sectors. And these oil & gas dividend stocks can provide a steady stream of income while also offering the potential for capital appreciation. Let’s take a look!

Marathon Petroleum (MPC)

Source: Shutterstock

Marathon Petroleum’s (NYSE:MPC) stock has been running a marathon for as far as you can zoom back. This company has a solid management team and fundamentals to boot. So, I won’t be surprised if the stock continues to rally.

With global oil demand poised for continued growth, Marathon seems well-positioned to benefit from these tailwinds. Management is expressing confidence that limited supply from a lack of new refineries being built will lead to a stronger-than-usual market.

Importantly, U.S. refineries are at an advantage. That’s because they are closer to where lower-cost crude oil and natural gas are extracted. Marathon is reinforcing this competitive edge by investing $1.3 billion in big, highly-profitable projects at their most earning-heavy facilities in Q1. The company’s cash flow is excellent and can support more investment down the line.

Work to upgrade some plants did hold back profits somewhat for now. But with that maintenance complete, Marathon is ready to meet rising needs for gasoline and other fuels as summer approaches. Marathon is doubling down too, announcing plans to buy back even more of their own stock to return value to shareholders alongside their steady dividend payments. If industry conditions continue improving as they expect, following a smart capital allocation strategy could serve the company well as the energy business evolves. The company’s dividend yield currently sits at 1.86%. However, its big buybacks make MPC stock a solid long-term bet.

Enbridge (ENB)

Source: JHVEPhoto / Shutterstock.com

Enbridge (NYSE:ENB) may not be the biggest gainer in this sector. However, its dividend is one of the best in the market right now. Once rate cuts kick in, that 7% yield is going to be far too juicy for Wall Street to ignore.

Enbridge hasn’t had the best start to the year though. That’s despite the company’s adjusted EBITDA increasing 11% compared to the same period last year. Additionally, Enbridge’s earnings per share of 67 cents also trounced estimates by 8 cents. However, sales fell to $8.2 billion, which missed by around $862 million. I’m surprised by how well this stock has held up despite the miss.

Regardless, this proves to me that the market sees ENB stock as a long-term dividend play, and it clearly has a lot of support at its current price.

Phillips 66 (PSX)

Source: Jonathan Weiss / Shutterstock.com

Phillips 66 (NYSE:PSX) posted “meh” results in Q1 as well. While their crude oil processing rates continued to outperform averages across the industry for the fifth consecutive quarter, earnings took a hit due to scheduled maintenance work that limited the production of higher-value products. The ongoing conversion of their Rodeo facility to produce renewable fuels as well as rising costs of commodities that are part of inventory hedging strategies also presented challenges.

But the real story worth paying attention to is the strategic strides they are making. The company’s Rodeo Renewable Energy Complex is now generating 30,000 barrels per day of renewable fuels. It’s right on track to reach full capacity of 50,000 barrels next quarter.

Most impressively, Phillips 66 continues to be an absolute champion at returning cash to shareholders. The company has distributed almost $10 billion to investors since mid-2022 alone. Phillips 66 also just increased their quarterly dividend by 10%, amounting to a compounded annual growth rate (CAGR) of 16% since 2012. With over $560 million in cost reductions achieved so far and projected EBITDA of $3.6 billion from midstream operations, the potential for further sizable returns of capital to shareholders looks very compelling. There is plenty of upside from here.

It’s also worth noting that PSX stock carries a 3.2% dividend yield, which is also pretty reasonable.

On the date of publication, Omor Ibne Ehsan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Omor Ibne Ehsan is a writer at InvestorPlace. He is a self-taught investor with a focus on growth and cyclical stocks that have strong fundamentals, value, and long-term potential. He also has an interest in high-risk, high-reward investments such as cryptocurrencies and penny stocks. You can follow him on LinkedIn.

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