After food, water and shelter, energy is probably the next most important necessity – certainly in the modern world.
Years ago, when Hurricane Wilma whacked South Florida where I live, we happened to be in New York for a wedding. The decision to come home was based primarily on when power would be restored.
Forget air conditioning – without electricity, stores wouldn’t be open, food would spoil in refrigerators and many gas pumps wouldn’t work.
Two weeks ago, we saw a serious reminder of how vital energy is to our lives: Along the East Coast, people were waiting in long lines for gas after a pipeline went down as a result of hacking.
With the global economy reopening, demand for energy will likely be the strongest it’s been in years. Year to date, oil prices have risen 30%.
The average gas price in the U.S. is up slightly more at 33% and is now $3.11 per gallon. Gas averaged $2.38 per gallon at the end of 2020.
Inflation is picking up, and a wide variety of commodities are seeing large price increases. I expect energy prices to continue to rise for the next year. I wouldn’t be surprised at all if oil reaches $80 per barrel. It’s currently at $63.
The way I’m playing the inflation boom is with dividend stocks in sectors that will benefit from a rise in prices and interest rates…
And one of those sectors is energy.
Chevron has raised its dividend every year since 1990.
As one of the oil majors, Chevron’s stock price is going to follow the price of oil. It is of the best-in-class producers, so as oil moves higher, Chevron should perform quite well. And you get a 5.2% yield while you’re waiting.
From a shorter-term trading perspective, I like ConocoPhillips (NYSE: COP).
The stock is in a channel pattern, which I use in my Technical Pattern Profits VIP Trading Research Service. I expect the stock to make its way up to $65 in the next several weeks.
The fundamentals look strong too. Earnings and revenue are projected to soar in 2021. The stock pays a more than 3% yield.
If you want to play the renewable energy space, take a look at Hannon Armstrong Sustainable Infrastructure Capital (NYSE: HASI).
Hannon Armstrong is a real estate investment trust that has $7 billion in managed assets that reduce carbon emissions, including solar and wind farms, green buildings, and stormwater remediation infrastructure.
But this isn’t a nonprofit – hardly. Distributable earnings per share have grown 7% per year on average between 2017 and 2020 and are expected to accelerate to between 7% and 10% over the next several years.
Currently, Hannon Armstrong’s dividend yield is a little below 3%, but because of rising distributable net income, management expects the dividend to rise each year through at least 2023.
With demand for energy soaring and a pickup in inflation imminent, I expect energy to be one of the leading sectors in the stock market. Make sure you’re positioned accordingly.