Investors seeking passive income opportunities may find the S&P 500’s 1.3% yield lacking, especially as growth companies with low or no dividends dominate the index. For those looking for higher yields, the energy sector presents a compelling option, with many oil and gas companies offering dividends and attractive valuations. In this article, we will explore three dividend stocks and an ETF that offer more passive income potential than the S&P 500.
Phillips 66, a refining and midstream giant, recently reported its third-quarter earnings, which included an adjusted figure of $2.04 per share. Despite a significant legal accrual expense related to ongoing litigation, Phillips 66 is taking steps to improve its financial health by selling assets, closing underperforming refineries, and achieving cost savings through acquisitions. The company’s stock price has dropped, pushing its dividend yield to an enticing 3.8%. With a commitment to returning capital to shareholders through buybacks and dividends, Phillips 66 presents an opportunity for income investors seeking to boost their passive income.
Chord Energy, positioned at the upstream end of the energy value chain, offers a generous dividend yield of 9.1%. The company’s focus on maintaining financial health and returning capital to shareholders, coupled with its exceptional free cash flow, makes it an attractive investment option. Chord Energy generates substantial revenue from its upstream assets in the Williston Basin and has the highest free cash flow yield compared to its peers. With strong free cash flow expected to continue in the near future, Chord Energy is a compelling choice for income investors interested in the oil sector.
For investors looking for a diversified approach to investing in energy infrastructure, the Global X MLP ETF offers a relatively safe option. The ETF holds 20 master limited partnership (MLP) stocks with a focus on midstream pipeline and storage facility companies that generate stable income from long-term contracts. With a low total expense ratio of 0.45%, the ETF provides exposure to a high-yield sector at a reasonable cost. As the energy transition unfolds, natural gas is expected to play a significant role in the energy sector for years to come, making the Global X MLP ETF a strategic investment for income-focused investors.
In conclusion, Phillips 66, Chord Energy, and the Global X MLP ETF stand out as excellent dividend-seeking options for investors looking to enhance their passive income potential. With attractive dividend yields, strong financial performance, and a focus on returning capital to shareholders, these investments offer a compelling alternative to the low yields of the S&P 500. By diversifying across these dividend stocks and ETF, investors can build a robust passive income stream while benefiting from the potential growth opportunities in the energy sector.
