In this article, we will take a look at some of the best dividend stocks from the energy sector.
The energy sector’s presence within the broader US stock market has fluctuated over time. In the 1970s, it accounted for around 15% of the market, whereas today, it represents just 3.2% of the broader index, as reported by U.S. Bancorp Investments. However, energy consumption has increased since the 1970s, and its significance has not diminished. According to analysts, from an economic standpoint, energy stocks hold a more substantial role in the broader market than their current index weighting suggests.
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Towards the end of 2024, energy sector stocks saw considerable fluctuations, rising by over 6% in November before declining nearly 10% in December. By the close of the year, the broader market’s energy sector, which had been up nearly 20% at its highest point, finished 2024 with a return of just 5.72%. This performance fell well behind the wider market. Rob Haworth, senior investment strategy director with U.S. Bank Asset Management, made the following comment about the performance of energy stocks:
“As 2024 came to a close, markets responded to the environment for energy prices. In part, it reflects concern that Oil Petroleum Exporting Countries+ (OPEC+) may soon boost production, which would add to an already solid supply situation. The oil market is one that remains well supplied but isn’t well demanded. Although the U.S. economy is strong, other major oil users like China and Europe are experiencing economic challenges. As a result, global oil demand is lagging.”
Although energy stocks fell short of investor expectations, global investment in the low-carbon energy transition grew by 11% in 2024, reaching a record $2.1 trillion, according to BloombergNEF’s (BNEF) Energy Transition Investment Trends 2025 report. This growth was largely driven by increased investment in electrified transportation, renewable energy, power grids, and energy storage, all of which hit new highs last year. However, while total investment in energy transition technologies set a new record, its growth rate was slower than in the previous three years, when annual increases ranged from 24% to 29%.
BNEF’s report also highlighted a clear divide between investment in well-established and emerging clean energy sectors. Proven technologies with scalable business models—such as renewables, energy storage, electric vehicles, and power grids—accounted for the bulk of 2024’s investment, totaling $1.93 trillion, a 14.7% increase. This growth persisted despite challenges from policy changes, higher interest rates, and an expected slowdown in consumer demand.
Even as oil prices decline, an increasing number of fossil fuel companies are allocating a larger share of their profits to shareholders, indicating a shift in focus away from reinvesting in oilfield development. Some major oil firms have even taken on debt to maintain shareholder payouts. According to Bloomberg, four of the world’s five oil supermajors borrowed a combined $15 billion between July and September 2024 to fund share buybacks, underscoring their commitment to rewarding investors. In addition, companies in the energy sector distributed over $49 billion in dividends during the third quarter of 2024, up from $32.2 billion three years ago, as reported by Janus Henderson. Given this, we will take a look at some of the best energy dividend stocks to buy now.
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Our Methodology
For this list, we first scanned Insider Monkey’s database of 900 hedge funds, as of the third quarter of 2024. Our focus was on selecting energy companies across various sectors within the energy industry, including exploration and production, utilities, renewable energy, and oil refining and marketing. From this pool of companies, we identified 10 companies that prioritize distributing dividends to their shareholders and ranked them in ascending order of the number of hedge funds having stakes in them at the end of Q3 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
10. Devon Energy Corporation (NYSE:DVN)
Number of Hedge Fund Holders: 41
Devon Energy Corporation (NYSE:DVN) is an American leading natural gas and oil exploration and production company, based in Oklahoma. The company maintains a strong financial position with an investment-grade-rated balance sheet. Thanks to its low break-even point, it remains profitable even when oil prices are relatively low. In addition, it has more than a decade’s worth of drilling opportunities on its land.
Notably, Devon Energy Corporation (NYSE:DVN) expanded its portfolio in the second half of 2024 by acquiring additional onshore US assets. This move highlights not only its solid financial foundation but also its ability to grow through acquisitions. In essence, the company can serve as an industry consolidator, acquiring assets that may be too small to attract the interest of larger energy giants.
Devon Energy Corporation (NYSE:DVN) has a strong cash position, which makes it a reliable investment opportunity for income investors. In the most recent quarter, the company generated over $1.6 billion in operating cash flow, up from $1.5 billion in the previous quarter. It has been making regular dividend payments to shareholders since 1993, coming through as one of the best dividend stocks from the energy sector. The company offers a quarterly dividend of $0.22 per share and has a dividend yield of 4.37%, as of February 8.
At the end of Q3 2024, 41 hedge funds in Insider Monkey’s database held stakes in Devon Energy Corporation (NYSE:DVN), compared with 52 in the previous quarter. These stakes have a total value of over $793.5 million.
9. Kinder Morgan, Inc. (NYSE:KMI)
Number of Hedge Fund Holders: 42
Kinder Morgan, Inc. (NYSE:KMI) is a Texas-based energy infrastructure company that owns and operates oil and gas pipelines and terminals. The company remains optimistic about its performance, projecting a 9% increase in adjusted earnings per share this year. This growth is driven by fewer obstacles from asset sales and major contract renewals, as well as the positive impact of recent expansion efforts, including the late-year acquisition of STX Midstream.
Looking ahead, Kinder Morgan, Inc. (NYSE:KMI)’s long-term growth prospects have significantly improved. The company has secured several large natural gas pipeline projects scheduled to start operations in 2028, while a series of smaller projects set to launch soon has further strengthened and extended its growth momentum. The stock has surged by nearly 63% over the past 12 months, significantly outperforming the broader market.
Kinder Morgan, Inc. (NYSE:KMI)’s cash generation makes it an attractive option for income investors. This cash position allows it to comfortably support its dividend payments. In the latest quarter, the company reported $1.5 billion in operating cash flow and $700 million in free cash flow. Currently, it pays a quarterly dividend of $0.2875 per share for a dividend yield of 4.25%, as of February 8. It is one of the best dividend stocks on our list as the company has raised its payouts for seven consecutive years.
As of the close of Q3 2024, 42 hedge funds tracked by Insider Monkey held stakes in Kinder Morgan, Inc. (NYSE:KMI), up from 41 in the previous quarter. The consolidated value of these stakes is more than $1.3 billion. With over 18.2 million shares, Orbis Investment Management was the company’s leading stakeholder in Q3.
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