- Rising cash flows as a result of higher oil and gas prices have led to increasing shareholder payouts and dividends
- The outlook for oil and gas in 2022 remains bullish
- MLPs are expected to stage a comeback this year
With the New Year, it’s time for investors to recalibrate their portfolios. Last year was an annus mirabilis for energy investors thanks to high energy prices. The oil markets continue to be volatile and turbulent thanks to the pandemic and the ongoing energy transition.
But so far, so good. It’s still early days, but the energy sector has jumped out of the gates flying. After the first full trading week in 2022, the energy sector’s favorite benchmark Energy Select Sector SPDR ETF (NYSEARCA: XLE) has gained 9.0% vs. -1.5% by the S&P 500.
Indeed, oil prices are now trading at their highest level in more than a month, with both Brent crude and WTI trading above $80 as Omicron fears continue easing. A new study conducted by South African scientists suggests that Omicron could displace the Delta variant of coronavirus because infection with the new variant boosts immunity to the older one. So far, people who contract Omicron are presenting with milder symptoms than those who get infected with Delta and are also less likely to be hospitalized.
Wall Street remains largely bullish on the energy sector, with some analysts predicting even higher oil prices in 2022.
Barclays has predicted that the WTI contract price will average $77/bbl in 2022, up from $73 in Q4 2021, noting that the Biden administration’s sale of oil from the Strategic Petroleum Reserve isn’t a sustainable way to bring down prices. Barclays says prices could go even higher than that forecast if COVID-19 outbreaks are minimized and thus allow demand to grow more than expected.
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Many renewable energy companies operate in the red and, therefore, do not pay dividends. However, some are notable for their combination of solid financial standing and attractive dividend payouts. NextEra Energy Partners, L.P.(NYSE: NEP) belongs to the latter category.
NextEra Energy Inc. (NYSE: NEE) is a Florida-based clean energy company and America’s largest electric utility holding company by market cap. NEE is the world’s largest producer of wind and solar energy, with 45,900 megawatts of generating capacity. The company owns eight subsidiaries, with the largest, NextEra Energy Services, supplying 5 million homes in Florida with electricity.
NextEra Energy Partners, L.P. is one of NextEra Energy Inc.‘s subsidiaries. NextEra Energy Partners acquires, owns, and manages contracted clean energy projects in the United States. The company owns a portfolio of contracted renewable generation assets consisting of wind and solar projects, as well as contracted natural gas pipeline assets.
NextEra Energy Partners owns interests in dozens of wind and solar projects in the United States, as well as natural gas infrastructure assets in Texas. These contracted projects use leading-edge technology to generate energy from the wind and the sun. Although NEP currently pays a modest 3.52% yield, the company’s management is shooting for 12-15% dividend growth through 2024, making this a good stock for income investors looking for growth.
