The 7 Best Energy Stocks for Inflation
In a fast-growing, bullish market, energy stocks are generally viewed through the lens of their dividend-paying abilities. However, when markets encounter turbulence or turn bearish, energy stocks become prized as defensive investments. In an inflationary market, both are true. Holding on to some of the best energy stocks for inflation is a great way to both safeguard your wealth and capitalize on the revenue of a well-orchestrated dividend reinvestment plan (DRIP).
If you’re looking to diversify into safer investments in 2022, here’s a look at seven of the best energy stocks for inflation and why adding them to your portfolio is a smart idea. These represent companies across the sector: from traditional hydrocarbon companies, to renewable leaders, to midstream providers and beyond.
7. NextEra Energy Inc. (NYSE: NEE)
The largest publicly traded electric utility company on the market, NextEra Energy is leading the charge in renewables. Opening a position in this company today isn’t just a hedge against inflation; it’s a bet on a renewable future. While oil and gas companies have shot up in 2022, NEE has fallen. Yet, investors should view this as a long-term buying opportunity; especially for a company that raised its dividend 10% in February. NextEra has very consistent year-over-year financials, which offers enticing stability for investors amidst inflation concerns.
6. Cheniere Energy Inc. (NYSE: LNG)
The United States is one of the biggest global exporters of liquified natural gas (LNG). In fact, leading this effort is Cheniere Energy Inc.: the country’s largest operator of LNG terminals and holder of liquefaction contracts. With global gas markets in flux, Cheniere shares have jumped in 2022 and they show no signs of slowing down. The company pulls in annual sales revenues of more than $15 billion, paying a 0.94% dividend. And, with renewables on the rise, this company represents a strong long-term play, poised to benefit from significant tailwinds.
5. Enbridge Inc. (NYSE: ENB)
Midstream energy companies are some of the best energy stocks for inflation because of their role in facilitating commodity transportation. There’s no better example than Enbridge, which moves 30% of the crude oil produced in North America and more than 20% of the liquified natural gas consumed by the country. This, combined with its heavy hand in renewables, makes it a strong bet to outperform inflation. The company’s current P/E is appealing relative to the industry, and very strong operating margins make its $4.5 billion annual profit figure very sustainable. The company also pays a strong 6.13% dividend.
4. Plains All American Pipeline LP (NASDAQ: PAA)
Energy infrastructure is another midstream market segment, and another place to find one of the best energy stocks for inflation. Plains All American Pipeline owns and operates infrastructure crucial for transporting crude oil from the Permian Basin region of West Texas: a booming area for hydrocarbon extraction. Simply put, the company maintains some of the most important assets for national energy security. This moat, combined with a strong balance sheet, makes PAA a long-term buy-and-hold that’s capable of outperforming inflation.
3. Baker Hughes Co. (NASDAQ: BKR)
Baker Hughes plays a critical role in supporting the United States’ energy infrastructure at almost every level. The company also has a balance sheet that’s well-positioned to succeed in any market. More impressive, the company’s EPS continues to grow: up nearly 100% year-to-date, 46% over the past five years and predicted to grow another 50% over the next five years. Investors concerned about inflation can take solace in the company’s $20.5 billion in annual sales, which are also gaining steam as the domestic energy industry shoulders the increased burden of global demand.
2. Chevron Corp. (NYSE: CVX)
Like most other hydrocarbon companies, Chevron has been on a tear in 2022, largely fueled by global geopolitical tensions affecting oil and gas supplies. Nevertheless, Chevron’s success makes it more than a thematic play: it’s also a prime candidate to outperform inflation. Not only does Chevron’s financials look good, the company is investing for the future, in technologies like carbon capture. It’s this kind of thinking that’s made CVX a Dividend Aristocrat, and the company’s 3.50% dividend only makes it more appealing to investors trying to beat inflation with energy stocks.
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Energy Stocks as a Safe Haven Investment
As major industries struggle to find footing among inflationary concerns, energy stocks have emerged as the clear frontrunner for returns in 2022 (and beyond). As threats of inflation persist, energy stocks become more and more appealing as safe haven investments. The seven stocks mentioned above are some of the best energy stocks for inflation. Moreover, they all have promising future prospects that make them buy-and-hold candidates even after inflation comes back under control.
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