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Old 11-20-2011, 08:36 PM   Nav to Top  #1
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Money Looking for Big Dividends in the Energy Sector

Dividends in the energy sector are a great way to play the market in today's environment. Bulls and bears are fighting due to different views in the different global regions. We all know the chaos that is the European debt problems right now and that has the potential to spread into other economies which makes investors cautious. Economic data in the US lately has been better than expected and that points to a US economy that is not going into recession which is what I have said all summer long, even with the problems in the housing markets and unemployment numbers. Lastly, we have our developing markets which are still growing rapidly and becoming a bigger percentage of the overall global economy. Because of all of this, I feel oil prices are going to stay elevated in the near term and because of this, energy names are a very good way to play this current market.

Risk assessment of dividends in the energy sector

Now playing in the energy sector is a strong way to play the current market on the long side, however, to minimize risk, I would find names that have nice big dividends to pad any downside losses. I would look for dividends in the energy sector of at minimum 3% yield. The bigger the yield, the lower the risk as long as those are dividends that will be maintained by management. Investing in the MLP group has proven to be very profitable over the volatile summer as I have recommended Enterprise Product Partners and Kinder Morgan Energy over and over. EPD sits at its 52 week high while yielding now just under a 6%. KMP has gone up 10 points since I started my position over the summer and it still yields 6%. This is how you make money while minimizing risk. I have always talked about how having a solid core portfolio of high yielding safe names makes sleeping much easier when volatility is around and these two names have been a big percentage of my overall core holding.

Other Dividends in the Energy Sector

Now there are many other companies that have big dividends in the energy sector, but some of them have a bit more risk. Chevron and Conoco both have over a 3 and 4 percent yield respectively. Conoco is a much better company in my opinion as it has better management while intending to break itself up which should provide shareholder value. Another name that I really like at current levels is BP. BP now is paying a healthy dividend again of 4% and it is still sitting 50% below where it was prior to the big oil spill. I feel BP is a name that is investable right now and could be a good long term holding.

If you want to take a bit of international exposure, you can look to China for dividends in the energy sector. Both Petrochina and CNOOC have a good yield and have share appreciation upside as well. Petrochina ADR now trades at $127 a share and I feel it can go to $160-170 within a few months as long as oil prices stay high, which I will due to global demand.

Now there are many other names that fit the scope of having dividends in the energy sector like PBR, OXY, or XOM. However, these names do not have over a 3% yield which is what I want you to look for in order to minimize risk in case oil prices start to fall (which I do not think they will). If you mitigate risk, your portfolio will be strong and you will sleep at night. This is why I want you to look for big dividends in the energy sector.


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Old 11-21-2011, 11:27 AM   Nav to Top  #2
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Default SDRL Our Latest Favorite

Seadrill, ticker SDRL has become one of our favorite energy dividends payers to add to our long term fund on the dips. Paying a reliable 9.00% as of this morning.
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