There’s a shift occurring in America’s oil production that is creating stable prices and benefiting consumers and businesses – and much of it is thanks to dividend investors.
The oil industry often goes through boom-and-bust cycles. Prices rise, so oil companies drill more. The added supply sinks prices, so oil companies cut back. This has occurred over and over again throughout the past century.
But lately, investors who demand steady dividends have pushed oil companies to have more reliable cash flows. No more feast-or-famine scenarios.
As a result, when OPEC announced it would cut production by over 1 million barrels per day to lift prices, the new steady-as-she-goes American oil industry picked up the slack and kept prices from skyrocketing.
In fact, American oil production is operating at a record-setting pace this year.
And that has been good for oil producers.
In the Permian Basin, operators become profitable when oil is trading at $61. As I write this, oil is trading at $73 per barrel.
We’re about two weeks away from many of the oil companies reporting second quarter earnings. Due to oil prices that are high enough to be profitable and cost-cutting by producers, I expect it to be a strong earnings season in the oil patch.
My favorite megacap oil company is Chevron (NYSE: CVX). It has been a recommendation in my monthly newsletter, The Oxford Income Letter, for years. Chevron has a nearly 4% dividend yield and has raised its dividend for 36 years in a row. There are a few smaller companies I’m watching too that could have big earnings reports in a few weeks.
If you’ve been reading Wealthy Retirement for a while now, you know that I’m very bullish on the energy sector. I expect oil prices to rise as demand increases around the world and the dollar falls. Additionally, this earnings season should be a good one for the sector and could lead to outsize moves for certain oil stocks.
If you don’t have enough exposure to energy stocks, I suggest you add more before earnings reports start coming out in two weeks.