Top Oil Stocks With Great Dividends: What Should I Invest In Right Now?

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Oil stocks have been longtime favorites for investors seeking income. With lower oil prices causing many oil stocks to decline in recent months, their dividend yields have risen.

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A user on Reddit recently asked which oil stocks with attractive dividends are the best picks right now. There are plenty of good answers to that question, but I think three oil stocks especially stand out.

Best oil stocks to be in right now
byu/jabster2--0 individends

1. Enterprise Products Partners

I think the best oil stocks for income investors right now can be found in the midstream industry. And my favorite midstream stock is Enterprise Products Partners (NYSE: EPD). The limited partnership (LP) operates more than 50,000 miles of pipeline that transports crude oil, natural gas, natural gas liquids (NGLs), petrochemicals, and other refined products.

Enterprise Products Partners' forward distribution yield is 6.67%. A high yield can sometimes be a warning sign about underlying business problems. However, that's not the case with this stock. Enterprise has increased its distribution for 26 consecutive years and should be in a great position to keep that streak going.

Lower oil prices can cause lower revenue and profits for major oil producers such as Chevron and ExxonMobil. However, midstream leaders such as Enterprise Products Partners charge the same amount to transport liquids through their pipelines no matter what commodity costs are.

Enterprise stands above the pack in its industry, in my view, because of its remarkable resilience. The LP has delivered double-digit percentage returns on invested capital (ROIC) and steady cash flow per unit during some of the most difficult periods for the oil and gas industry without missing a beat.

2. Energy Transfer

Energy Transfer (NYSE: ET) is another midstream stock that I really like. Like Enterprise Products Partners, Energy Transfer is an LP. It operates an even more extensive network of pipelines spanning over 130,000 miles.

This stock also pays a juicier distribution than Enterprise. Energy Transfer's forward distribution yield is 7.29%. Why have I listed it behind Enterprise Products Partners? Mainly because Energy Transfer's distribution track record isn't as strong. The LP cut its distribution in 2020 with the COVID-19 pandemic chaos impacting its business.

I'm not worried about the distribution now, though. Energy Transfer shouldn't have any problems funding its distributions. Even better, the LP expects to grow its distributions by 3% to 5% per year.

Energy Transfer is also well-positioned to benefit from the increasing adoption of artificial intelligence (AI). The data centers that host AI models require massive amounts of electricity. Much of this electricity is and will continue to be generated by natural gas. One of Energy Transfer's top growth opportunities is supplying natural gas to power plants that serve data centers.

Image source: Getty Images.

3. Enbridge

My third oil stock to buy right now is also a major player in the midstream industry -- Enbridge (NYSE: ENB). The Calgary-based company owns more than 18,000 miles of crude pipeline that stretch through Canada and the U.S., plus nearly 19,000 miles of natural gas pipeline.

However, Enbridge isn't only a midstream company. It also ranks as the largest natural gas utility in North America by volume, thanks to the 2023 acquisitions of three U.S. utilities. Enbridge serves around 7 million customers, delivering 9.3 billion cubic feet of natural gas daily.

In addition, the company has invested heavily in renewable energy. Enbridge expects to be able to generate over 500 megawatts from its solar power facilities by the end of 2025. It has long-term agreements in place with big companies, including AT&T and Toyota.

Enbridge's forward dividend yield is 5.91%. The company has increased its dividend for an impressive 30 consecutive years. I think investors can count on more dividend hikes in the future.

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Keith Speights has positions in Chevron, Enbridge, Energy Transfer, Enterprise Products Partners, and ExxonMobil. 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.