3 High-Yield Energy Stocks to Buy in May

The news is filled with stories about high energy prices. While that's bad for filling your gas tank, it is good for energy company revenues. Expecting strong financial performance, Wall Street has pushed up energy stock prices. Now is the time for caution, because history shows oil prices will eventually fall.

If you are looking for a high-yield energy stock right now, don't extrapolate high energy prices into an infinite future. What you want to own is a company that can survive the entire energy cycle, including periods of low oil prices. Three great options in May are Chevron (NYSE: CVX), Enterprise Products Partners (NYSE: EPD), and Enbridge (NYSE: ENB). Here's why.

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Chevron beats out Exxon

Conservative investors could choose either ExxonMobil (NYSE: XOM) or Chevron and be just fine. They have both proven to be reliable dividend payers across the entire energy cycle, with each having supported its yield with decades of annual dividend increases. The big difference from a dividend investor's point of view will be that Chevron's 3.6% yield is notably higher than Exxon's 2.6%.

That said, both companies are large and globally diversified, with assets across the entire energy value chain. That helps soften the swings in oil prices over time. And, just as important, both Exxon and Chevron have very strong balance sheets, with Exxon's debt-to-equity ratio ending 2025 at roughly 0.2x and Chevron's at 0.25x. Those are both low on an absolute level, but also the two lowest in the integrated energy peer group.

Basically, Exxon and Chevron both have the wherewithal to take on debt during energy downturns so that they can continue to support their diversified businesses and dividends until oil prices recover. Given Chevron's more attractive yield, it is the better option for income-focused investors right now.

Focus on volume, not commodity prices

Enterprise and Enbridge are both North American midstream energy giants. They own the energy infrastructure, such as pipelines, that help to move oil and natural gas around the world. The first benefit of owning these high-yielders is that their North American focus protects each of them from the direct impact of the geopolitical conflict unfolding in the Middle East. The second benefit is that their financial performance isn't reliant on oil and gas prices.

Both Enterprise and Enbridge charge fees for the use of their energy infrastructure assets. The volume flowing through their pipes is more important than the price of what they move. Given the importance of oil and natural gas to the world economy, volumes tend to be strong throughout the entire energy cycle.

Enterprise is a master limited partnership (MLP) and a pure play pipeline investment. It offers a distribution yield of 5.6%, but some investors may not want to deal with the tax complications of an MLP. Enbridge is a Canadian company, so U.S. investors have to pay Canadian taxes (some of which can be reclaimed come tax time) on its 5.1% dividend yield. That said, Enbridge's business is also more diversified, as it includes natural gas utilities and clean energy investments in its asset portfolio. Both of those business segments generate reliable cash flows, so it doesn't materially change how investors should think about its dividend.

Enterprise and Enbridge have both increased their dividends annually for decades. That said, the yield is likely to make up the lion's share of the return here, given that both businesses have a history of slow, steady growth. But if you are looking to maximize income, that probably won't bother you.

Don't get too excited about high oil prices

The key with Exxon, Chevron, Enterprise, and Enbridge is that they have proven they can keep paying investors their dividends when oil prices are high and, more importantly, when they are low. It is easy to get caught up in the moment on Wall Street. In the energy sector today, that means focusing on the short-term spike in oil prices, which will most certainly lift many boats in the space.

If you are a dividend investor, however, you need to think about the long term. And that requires thinking about what will happen when oil prices fall. If history is any guide, Exxon, Chevron, Enterprise, and Enbridge will keep paying and increasing their dividends just like they have for years.

Reuben Gregg Brewer has positions in Enbridge. The Motley Fool has positions in and recommends Chevron and Enbridge. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy.