Top Energy Stocks to Buy in 2024: Solid Dividends Plus Growth Potential

The energy sector is poised for potential growth in 2024, making it a suitable time for investors to capitalize. Energy stocks, representing oil, gas, utilities, and renewables, offer portfolio diversification and substantial dividend income. The average dividend yield in the S&P 500 energy sector sits at 4.1%, nearly double the S&P 500 average. Attractive valuations and rising energy demands globally also showcase these stocks’ growth potential. According to projections, global energy consumption will grow by 48% through 2050.

However, the inherent volatility of commodity prices and supply chain disruptions can pose risks. For example, average 2022 Q1 earnings for energy companies dropped 20% from the previous quarter. Factoring in wider market corrections, the S&P Energy Select Sector Index also recently saw a 15% drop from its 52-week high.

Yet, for long-term investors, leading energy stocks with robust operations can provide a balanced exposure. The best energy stocks outlined below specifically exhibit secular growth trends, solid balance sheets, and attractive dividends to deliver value.

Understanding the Energy Sector!

Before we move further, let’s look at the energy sector and see how it’s growing.

The global energy sector consists of diverse companies focused on oil, natural gas, coal, nuclear, renewable energy sources like solar and wind, and power utilities. While fossil fuels still dominate, meeting over 80% of world energy demand, renewable generation is experiencing massive growth as countries and companies pivot to clean energy.

Oil & Gas

Oil and gas companies locate hydrocarbon reservoirs, extract crude or natural gas, refine them into products like gasoline, diesel, and propane, and facilitate distribution to end-users. Key economic drivers include global supply and demand dynamics, OPEC policy, geopolitical events, commodity prices, exploration and production costs, infrastructure constraints getting oil/gas to market, consumer fuel taxes, and environmental regulations.

In 2024, natural gas markets remain tight as Europe’s energy crisis bolsters demand for liquefied natural gas (LNG) exports. Meanwhile, oil prices are forecast to moderate following a volatile 2022 but remain well above historical averages through 2024.

Prices are propped up by limited spare production capacity and supply growth constraints, even as economic growth concerns tamp down demand. With strong cash flows, the oil & gas industry is seeing greater capital investment into expanded drilling and new projects.

The International Energy Agency forecasts that oil demand could peak by 2030 and natural gas demand soon after if the renewable energy transition accelerates global clean electrification. However, under more conservative scenarios, oil and gas have remained integral to meeting world energy needs for years.

Renewable Energy

The renewable energy subsector includes companies developing solar, wind, hydroelectric, geothermal, and bioenergy projects. Sources like solar and wind have seen exponential growth recently. The International Energy Agency (IEA) estimates renewables will account for over 90% of new power capacity additions through 2026, drastically cutting global reliance on fossil fuels.

Key economic drivers for renewables are climate change policy, national clean energy targets, technology costs and efficiencies, incentive structures like tax credits, interest rates, and wholesale energy market electricity prices. Supply chain constraints for some raw materials and pressure on electric transmission infrastructure pose challenges to the pace of expansion. Yet the future is undoubtedly bright.

BloombergNEF forecasts that plunging technology costs will make solar and wind the cheapest sources across over two-thirds of the world in 2023. Renewable energy adoption is also accelerating with energy security and grid stability benefits.

Utilities

Electric, natural gas, and water utilities are crucial in providing these essential services to homes, businesses, and industrial facilities. Regulation, wholesale power prices, capital expenditures on infrastructure modernization, power generation assets (like renewables), interest rates, and the costs of fuel inputs all significantly impact utilities’ financial performance.

Investment continues flowing into upgrades to electricity transmission and distribution grids, storage solutions to support growing renewable power integration, cybersecurity and automation capabilities, and replacing aging infrastructure. However, utilities also face pressure from electrification, decentralization of energy production, and shifting customer expectations – requiring strategic adaptation of their traditional business models.

Coal, Nuclear & Other

The coal and nuclear power subsectors play important but declining roles in meeting electricity demand in select domestic and overseas markets. Growth opportunities remain constrained compared to years past.

Technologies like small modular nuclear reactors, advanced ultra-supercritical coal plants, and carbon capture may shift coal and nuclear energy’s trajectory. But they face scrutiny over safety, environmental impacts, high costs, and long development timelines.

The global energy sector remains indispensable to economic function and modern human life. As the renewable energy transformation continues accelerating, myriad investment opportunities for investors await across both traditional and emerging segments of energy markets.

Beginner’s Guide to Investing in Energy Stocks!

As you know, the energy sector is growing daily and offers exciting investment opportunities, but for beginners, navigating the complexities can feel daunting. Let us provide you with essential information and strategies to help you make informed decisions on how and which energy stocks to buy as a beginner.

The Basic Investment Concepts

• Risk Tolerance: This determines your comfort level with potential losses. Energy stocks can be volatile, so assess your risk tolerance honestly and choose investments accordingly.
• Diversification: Don’t put all your eggs in one basket! Spread your investments across different energy subsectors and other sectors to mitigate risk.
• Valuation Metrics: Understand key metrics like price-to-earnings (P/E) ratio, dividend yield, and price-to-book (P/B) ratio to evaluate a stock’s value relative to its earnings, dividends, and assets.

Recommend Strategies For Beginners

• Exchange-Traded Funds (ETFs): These provide instant diversification and exposure to a basket of energy stocks, reducing individual stock risk. Consider ETFs like VDE (Vanguard Energy ETF) or XLE (SPDR Energy Select Sector ETF).
• Dividend-Paying Stocks: These offer regular income while your investment grows. Look for established companies with consistent dividend payouts, like Duke Energy (DUK) or NextEra Energy (NEE).
• Low-Cost Index Funds: These passively track a specific index, like the S&P 500 Energy Index, offering broad exposure at a minimal cost. Funds like SCHF (Schwab S&P 500 Energy ETF) or IOO (iShares S&P 500 Index ETF) should be considered for general market exposure.

The Common Pitfalls To Avoid

• Chasing “Hot” Stocks: Don’t jump on the bandwagon without thorough research. Understand the underlying fundamentals and long-term potential before investing.
• Ignoring Risk: Diversification and risk assessment are crucial. Only invest what you can afford to lose, even in seemingly promising companies.
• Emotional Investing: Don’t panic sell during market downturns or get overconfident during upswings. Stick to your long-term investment plan.

Additional Tips!

• Start small and gradually increase your investment as you gain experience.
• Stay informed about industry trends and company news.
• Rebalance your portfolio regularly to maintain your desired asset allocation.
• Consider seeking professional guidance from a financial advisor for personalized recommendations.

Investing in the best energy stocks can be a rewarding journey, but it’s crucial to approach it with knowledge, caution, and a long-term perspective. By following these guidelines and utilizing the resources provided, you can confidently navigate the energy landscape and make informed investment choices that align with your financial goals.

Advanced Strategies for Energy Stock Investing!

Now that you have mastered the basics, you’re ready to explore the advanced realm of energy stock investing. Here, you will see technical analysis, options trading, and thematic investing, equipping you with sophisticated tools to navigate the complex energy landscape.

Technical Analysis

• Chart Patterns: Analyze historical price and volume charts to identify recurring patterns like head-and-shoulders, triangles, and flags that might suggest future price movements. Remember, past performance does not indicate future results, and these patterns can be misleading.
• Technical Indicators: Utilize tools like moving averages, MACD, RSI, and Bollinger Bands to measure momentum, identify overbought/oversold conditions, and generate trading signals. Interpret these indicators cautiously, as they are subjective and can create false positives.
• Fibonacci Retracements: Apply Fibonacci retracement levels to identify potential support and resistance zones based on historical price movements. While offering insights, these levels are not guaranteed and should be used with other analyses.

Remember, technical analysis is not a crystal ball. It should be used to complement fundamental analysis, not replace it. Always prioritize company fundamentals, industry trends, and your overall investment strategy.

Options Trading

• Covered Calls: Sell call options on stocks you already own to generate income while limiting potential upside. This strategy is suitable for income-generating stocks with moderate volatility.
• Protective Puts: Buy stock options to hedge against potential downside risk. This strategy is suitable for volatile stocks or periods of market uncertainty.
• Spreads: Combine buying and selling options contracts to create directional or neutral bets on the underlying stock price movement. These strategies involve higher risk and require a deep understanding of options mechanics.
• Caution: Options trading carries significant risk and is unsuitable for all investors. Ensure you fully understand the risks involved and have a solid understanding of options mechanics before engaging in these strategies. Consider seeking professional guidance from a qualified financial advisor.

Thematic Investing

• Clean Energy Transition: Invest in companies developing and deploying renewable energy technologies like solar, wind, and battery storage. This aligns with long-term sustainability trends and offers the potential for significant growth. However, the sector is still evolving, and companies may face regulatory and technological challenges.
• Electric Vehicles (EVs): Invest in companies involved in EV manufacturing, battery technology, charging infrastructure, and related materials. This high-growth sector benefits from increasing EV adoption but faces competition and potential regulatory hurdles.
• Energy Efficiency: Invest in companies developing and offering energy-efficient solutions for buildings, industries, and transportation. This sector caters to a growing demand for sustainability and cost reduction, but the market is fragmented, and competition is high.

Always remember thematic investing involves focusing on specific trends within the energy sector, increasing concentration risk. Ensure proper diversification and thoroughly research individual companies before investing.

Best Energy Stocks To Buy Now!

You must be thinking about the best energy stocks to buy now. Well, the answer is in the list below. So let’s take a look at them now:

• Chesapeake Energy (CHK)

After slashing nearly $3 billion of debt in 2022, Chesapeake is emerging as a leading U.S. natural gas producer with a strengthened balance sheet. The company expects to generate over $3.6 billion in adjusted EBITDAX in 2024 based on its premium Marcellus and Haynesville shale assets.

Natural gas prices should remain strong globally. Chesapeake estimates its free cash flow will enable excellent returns on capital and potential for share buybacks or dividends from its forecasted $3 billion surplus next year.

• Marathon Digital (MARA)

Marathon’s mining capacity will expand from 19.7 EH/s to 23.3 EH/s in early 2024 once the company’s new Texas data center comes online if Bitcoin establishes a new price floor and enters its next growth phase in 2024 amid blockchain adoption tailwinds, Marathon’s best-in-class mining efficiency, and low production costs position its operations for very high profitability at current difficulty levels.

Significant mining capacity growth plus crypto industry stabilization would catalyze tremendous upside for the stock.

• Brookfield Renewable (BEPC)

With over $68 billion in existing and identifiable development opportunities through 2030, Brookfield Renewable Partners will continue capitalizing on accelerating renewable power build-outs globally next year. 

Brookfield, the best energy stock, currently generates consistent 15-20% annual FFO growth, a model it anticipates maintaining through 2024 by leveraging its robust development pipeline across hydroelectric, solar, wind, storage, and distributed generation technologies.

• Devon Energy (DVN)

With oil production projected to expand up to 6% in 2024, Devon is poised to extend its success by capitalizing on its premier, low-cost U.S. shale basin acreage in the Delaware and Williston Basin. 

Maintaining disciplined reinvestment and stellar cost performance, Devon forecasts over $6 billion of operating cash flow next year (assuming $80 WTI oil), fueling an at least $4 billion fixed-plus-variable dividend distribution.

• General Electric (GE)

Under new leadership, a “leaner and greener” GE is positioned to drive profitable growth in 2024 through its critical focus areas – aviation, healthcare equipment, and renewable energy. GE anticipates aviation revenue growth accelerating to 20%+ next year as airplane deliveries ramp post-pandemic. 

The renewable energy segment expects to expand revenue by double-digits in 2024, fueled by high demand for GE’s industry-leading offshore wind turbines and equipment/services supporting clean power generation.

• Iberdrola SA (IBDRY)

Spanish electric utility Iberdrola continues investing over €150 billion through 2025 to expand its global renewables portfolio and grid infrastructure. With over 40% EBITDA exposure to the U.S. market, Iberdrola strategically grows its footprint by supplying cleaner energy stateside. 

Alongside high single-digit EPS growth targeted for 2024, Iberdrola maintains a compelling dividend growth policy – planning to grow dividends in line with net income this year and next.

• Constellation Energy (CEG)

With a sizable nuclear fleet and one of the nation’s largest renewable energy generation portfolios, Constellation expects strong earnings growth in 2024 as it expands contracted clean power sales to customers. 

2024 adjusted EPS guidance of $2.98 at the midpoint implies 21% year-over-year growth on the back of continued cost discipline. Constellation’s clean energy focus also unlocks growth opportunities as electricity demand rises to support vehicle electrification.

• NextEra Energy (NEE)

As the global leader in wind and solar generation, NextEra continues pushing the renewable energy frontier in 2024 and beyond. Powerful underlying tailwinds supporting 30% projected annual EPS growth remain firmly in place – namely Florida’s growing electricity demand, rapidly expanding renewable capacity fueled by tax credits and grid storage development. 

NextEra is primed to capitalize on unprecedented opportunities to transform the global energy landscape this decade and deliver substantial upside.

• JinkoSolar (JKS)

As a top-5 global solar module supplier, JinkoSolar expects to add another 45 GW of annual capacity by the first half of 2024. With solar power now representing the most cost-effective electricity source for over 70% of the world per BloombergNEF, tailwinds abound for efficient manufacturers like Jinko. And the Inflation Reduction Act supercharges U.S. demand just as Jinko boosts stateside manufacturing.

The guidance calls for 2024 revenue to top $12 billion, translating to robust bottom-line growth off industry-low production costs.

• Daqo New Energy (DQ)

As the lowest-cost polysilicon manufacturer vital for solar panel production, Daqo is perfectly positioned to capitalize on surging industry demand. Solar installations should soar over 30% annually through 2030 by most forecasts, fueling polysilicon shortages until major new capacity comes online.

Daqo will expand another 65,000 metric tons in 2024 amidst prices still 200% above historical norms, powering approximate 60% net profit margins and sizable cash generation. Its growth runway remains long as solar races to supply 10%+ of global electricity by mid-decade.

Not just these, there are many other energy stocks to buy like Tesla (NASDAQ: TSLA), NVIDIA (NASDAQ: NVDA), Applied UV (NASDAQ: AUVI), Nauticus Robotics (NASDAQ: KITT), Tilray Brands (NASDAQ: TLRY) but companies not directly in the energy sector, and might have tangential connections or future potential in the energy space.

Conclusion!

Though its stock market and risks exist, the energy sector’s ongoing transformation presents compelling investment opportunities as 2024 unfolds. Leading natural gas, renewables, electrification, and grid innovation stocks highlighted here are primed for further growth amid massive global buildouts. Their upside exposure to crucial decarbonization and energy security trends makes them warrant portfolio representation.

For long-term investors, constructing balanced blends of the sector’s highest quality names, like Chesapeake, NextEra, and JinkoSolar, can yield attractive, sustainable risk-adjusted returns as populations and economies continue relying on best energy stocks into the coming decade.