The energy market experienced a downturn with natural gas prices crashing earlier this year and crude slipping to 52-week lows. However, oil stocks are now on the rise again, with the price of oil surpassing $80/barrel. Traders had previously worried about the Federal Reserve’s rate hikes leading to a recession, but with hopes for a soft landing, it’s time to consider investing in oil stocks once more.
One key factor that makes oil an attractive investment is the chronic underinvestment in the industry since the oil market crash in 2014. Must-buy oil stocks for August include companies that have substantial reserves, strong profits, and offer generous dividends to shareholders.
Canadian Natural Resources (CNQ) is a long-standing Canadian energy giant that specializes in oil sands production. Unlike traditional oil wells, oil sands production involves processing hard rock. Once an oil sands mine is operational, it can sustain production for many years without a decline. This sets it apart from fracking, where production decreases shortly after being initiated. Canadian Natural Resources also rewards its shareholders with a 4.42% dividend yield and a large share buyback program.
BP (BP) faced challenges due to the Deepwater Horizon accident, which had severe environmental consequences and damaged the company’s reputation. However, BP has refocused its strategy and now prioritizes its core oil and gas operations over renewable energy investments. This shift could lead to a significant increase in BP’s valuation, especially since the stock currently trades at seven times forward earnings and offers a 4.28% dividend yield.
Ecopetrol (EC) is the state-operated oil company of Colombia, with the government controlling 88% of the firm. EC stockholders benefit from the high dividends paid by Ecopetrol, which also contribute to the country’s national treasury. The company has a dominant market position in Colombia, making it a low-cost oil producer. With a diverse portfolio that includes refining capacity, midstream assets, and renewable energy assets, Ecopetrol offers a mouth-watering 18% dividend yield.
In conclusion, investing in oil stocks in August can be a profitable move due to the underinvestment in the industry and the potential for economic growth. Canadian Natural Resources, BP, and Ecopetrol are attractive options for investors seeking to capitalize on oil stocks with strong reserves, profits, and dividends.
