Energy Stocks Are Soaring. 3 High-Yield Oil Stocks to Buy Now.

Core Viewpoint - The energy sector is currently the best-performing stock market sector, with a year-to-date increase of 7.9%, contrasting with a 5.1% decline in the S&P 500, driven by leading oil and gas companies that provide safety amid economic uncertainty and trade tensions [1] Group 1: Company Performance and Cash Flow - ExxonMobil, Chevron, and ConocoPhillips are highlighted as strong dividend stocks due to their ability to generate significant free cash flow (FCF) even at current oil prices [2][3] - ExxonMobil aims to break even at $30 per barrel Brent by 2030 and projects$110 billion in surplus cash through 2030, even if Brent averages $55 per barrel [4] - Chevron expects to generate$5 billion in FCF at $70 Brent in 2025 and$6 billion in 2026, with 75% of its oil investments breaking even below $50 per barrel Brent [5] - ConocoPhillips is investing in long-term projects expected to yield$6 billion in incremental FCF, supported by its acquisition of Marathon Oil [6] Group 2: Capital Return Programs - All three companies are returning substantial amounts to shareholders, with ExxonMobil returning $36 billion in 2024, Chevron over$75 billion between 2022 and 2024, and ConocoPhillips planning to return $10 billion in 2025 [7][8][9] - Despite high yields, these companies spent more on buybacks than dividends in 2024, indicating strong FCF generation and providing a cushion against falling oil prices [10] Group 3: Financial Health and Valuation - ExxonMobil, Chevron, and ConocoPhillips maintain strong balance sheets with debt-to-capital ratios near 10-year lows, allowing them to support operations and capital expenditures with FCF [12][13] - The companies exhibit reasonable valuations with low price-to-earnings and price-to-FCF ratios, suggesting they are good investment values [14] - Valuation metrics are based on trailing-12-month results, and while margins may decrease with lower oil prices in 2025, acquisitions and expansions could still drive earnings and FCF growth [15][16][17] Group 4: Investment Appeal - ExxonMobil, Chevron, and ConocoPhillips are positioned to grow cash flows and return profits to shareholders, offering yields significantly higher than the S&P 500 average of 1.3%, making them attractive for passive income investors [18] - Although energy is not typically viewed as a safe sector, these high-quality companies are considered safe stocks due to their strong balance sheets and manageable payouts [19]