2 Brilliant High Yield Oil Stocks to Buy Now and Hold for the Long Term

If you are looking at oil stocks, some of the best long-term options will be found among the integrated energy giants. The best time to buy an integrated energy giant, meanwhile, is usually when oil prices are weak. That's the case today, and two brilliant high-yield oil stocks to consider buying now are Chevron (NYSE: CVX) and TotalEnergies (NYSE: TTE). Here's why.

The integrated energy model is robust

There are three broad segments to the overall energy industry. Upstream companies drill for oil and natural gas, which means their top and bottom lines tend to be as volatile as oil and gas prices. The midstream helps to move oil and gas through infrastructure assets like pipelines. Midstream companies tend to produce reliable revenues from a toll-taker model, but they also tend to be slow-growing. And the downstream is made up of chemical and refining companies, where both the inputs and the outputs involve volatilely priced commodities. Each segment is obviously a bit different.

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While investors could invest in just one segment of the energy industry, including them all in one "integrated" company can help soften the inherent ups and downs of the energy sector. Adding to the diversification of large integrated energy companies is the fact that they usually have business ventures in multiple geographic regions. This allows the companies to invest where returns will be most attractive. If you want to put some long-term money into the energy sector, integrated energy companies should be high up on your list of choices.

Chevron and TotalEnergies stand out from the pack

There are a handful of independent integrated energy giants. ExxonMobil (NYSE: XOM) and Chevron hail from the U.S. market. Shell (NYSE: SHEL), BP (NYSE: BP), and TotalEnergies come from Europe. Out of this group, Chevron and TotalEnergies stand out thanks to their high dividend yields and strong business fundamentals.

Chevron, for example, offers a dividend yield of 5%. That's well above ExxonMobil's 3.8% and the energy industry average of around 3.6%. Chevron faces a few headwinds right now, including a contentious acquisition that has yet to close and the fact that it operates in politically unstable Venezuela. But the problems it faces today are likely to be transitory, so long-term dividend investors shouldn't get too worked up about them.

Moreover, Chevron has a proven history of increasing its dividend through difficult times. It has hiked its dividend payout annually for 38 consecutive years. And it has one of the strongest balance sheets of its closest peers, with only ExxonMobil having a lower debt-to-equity ratio. The combination of yield, financial strength, and dividend commitment makes this energy giant a strong buy candidate in the oil patch.

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TotalEnergies is another strong option, but for a slightly different reason. Yes, the yield is attractive at 6.5%. (U.S. investors have to pay French taxes and fees on the dividend, though some of that can be claimed back come April 15.) And the company supported its dividend in 2020 when European peers BP and Shell cut their dividends. TotalEnergies' dividend has been increased multiple times since that point, as well.

But the real story is that in 2020, BP, Shell, and TotalEnergies all announced plans to invest more heavily in clean energy assets. BP and Shell cut their dividends when they made that announcement, TotalEnergies did not. And since that point, BP and Shell have both walked back their clean energy commitments. TotalEnergies, if anything, has increased its commitment to the emerging power niche.

Basically, TotalEnergies is the only company in the independent integrated energy group that is pushing hard to expand into electricity (ExxonMobil and Chevron are both sticking more closely to their oil roots). This is notable because electricity's role in the global power market is increasing. In the United States alone, electricity is projected to increase from 21% of end power use to 32% by 2050, which is an over 50% jump. TotalEnergies is preparing right now to benefit from that demand growth, which is happening all over the world.

Pick wisely as oil prices weaken

Oil prices are always volatile, and they have been a bit weak of late. That's good news if you are trying to find some long-term investments in the oil patch. For most, the best option is to stick with integrated energy giants. Of that group, Chevron and TotalEnergies both stand out. One for its high yield and strong finances, the other for its high yield and its willingness to change with the world around it.

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Reuben Gregg Brewer has positions in TotalEnergies. The Motley Fool has positions in and recommends Chevron. The Motley Fool recommends BP. The Motley Fool has a disclosure policy.