This Oil Stock is Beating S&P 500 and Growing Dividends

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Oil companies have beaten the S&P 500 on a total return basis over the past decade and have rewarded shareholders as a result. In this clip from “The Rank” on Motley Fool Live, recorded on June 13, Motley Fool contributors Travis Hoium and Jason Hall discuss the opportunity in the oil industry and the top stocks to own in the space.

Travis Hoium: Oil could go down $30 per barrel tomorrow and this business would still be fun. I think that’s something to appreciate about it.

Jason Hall: The volatility does affect that to some degree, right?

Hoium: Yeah.

Hall: The movement of oil prices. But as a buyer of oil, that’s just part of it, but it’s less exposed because it’s not exposed to the downside so much. But the biggest things is refining capabilities. Its ability to refine crudes that it can source and get a better crack spread, because that’s better refiners. Its access to low-cost feedstocks, I think, is really important. Also, its access to natural gas as a feedstock for its petrochemicals manufacturing. We all like to eat, we like hot-water, we like food. That means we like fertilizer. Feedstocks, out of its chemicals plants are used to manufacture fertilizers, tires, plastics. You think about the entire healthcare industry and its reliance on plastics. There’s so many things like that that I like. Dividend history. This should tell you the strength of this business since it went public is a spin-out of ConocoPhillips (COP -8.47%). They’ve been pretty good at growing the dividend. They post dividend growth during the pandemic for good reason, because that was a tough period when global oil demand fell by [laughs] a third for a few months. But they’ve gone back and they’ve increased it twice since then. Then looking into the future, they are taking steps to be a big biofuels producer. To leverage, as Tyler likes, to talk about all those trillions of dollars worth of existing assets that can still be really important in a renewable energy future. Right, Tyler?

Crowe: Yeah. The only thing I’ll add is it’s not quite in public market. You have for 10 years but, Valero (VLO -5.31%) and Marathon Petroleum (MPC -5.10%), which all three of them are in the pure refining space. They are the only oil companies over the past decade to beat the S&P 500 on a total return basis, which just goes to show when we went through a period where oil and gas got rocked for 5-6 years, and they were able to turn along, generate wealth, and reward shareholders.