Unleashing the Power of High-Yielding Energy Stocks
When it comes to investing in energy stocks, many investors are drawn to those with high yields. However, these stocks often come with a trade-off: slower growth. But what if you could have the best of both worlds? ConocoPhillips (NYSE: COP) and MPLX (NYSE: MPLX) are two energy stocks that defy this conventional wisdom, offering high-yielding dividends and rapid growth.
ConocoPhillips: A Dividend Powerhouse
ConocoPhillips recently made headlines with a whopping 34% dividend increase, bringing its yield to nearly 3%. This is more than double the S&P 500’s dividend yield of less than 1.5%. The oil giant has a track record of high-octane dividend increases, with a 14% pay bump in 2023 and an 11% boost in 2022. And the good news doesn’t stop there. ConocoPhillips aims to be in the top 25% of dividend growers in the S&P 500, fueled by its needle-moving acquisition of Marathon Oil (NYSE: MRO).
A Game-Changing Acquisition
The acquisition of Marathon Oil will be immediately accretive to ConocoPhillips’ earnings, cash flows, and return of capital per share. The deal will also deepen its portfolio, adding significant high-quality, low-cost supply inventory. This will help drive cost synergies of over $500 million after closing the deal. Moreover, ConocoPhillips plans to continue buying back its shares aggressively, with a goal of retiring $20 billion of its stock over the next few years.
MPLX: A Monster Yield with Room to Grow
MPLX, a master limited partnership (MLP), currently offers a staggering yield of nearly 9%. While companies with yields this high often struggle to grow rapidly, MPLX has bucked this trend. The MLP recently boosted its payout by an impressive 12.5%, following 10% increases in each of the prior two years.
Fueling Growth with Expansion Projects and Acquisitions
MPLX’s robust growth rate is driven by expansion projects and accretive acquisitions. The MLP has grown its distributable cash flow at a 7.7% compound annual rate since 2020, fueled by deals such as its purchase of additional ownership interests in existing joint ventures and a dry gas gathering system. MPLX also has a very conservative financial profile, with a comfortable distribution coverage ratio of 1.6 and a low leverage level of 3.4.
A Bright Future Ahead
With their high-yielding dividends and rapid growth, ConocoPhillips and MPLX are attractive options for investors seeking high-octane total returns. Both companies have a strong foundation for future growth, with ConocoPhillips’ acquisition of Marathon Oil and MPLX’s expansion projects and acquisitions poised to drive cash flows higher. If you’re looking for energy stocks that can deliver both income and growth, these two companies are definitely worth considering.
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