Major Oil Companies Insulated from Volatility

When oil prices briefly soared above $100 per barrel in early September due to the conflict in Iran, many oil stocks rallied. However, investors might worry about dividend cuts if oil prices tumble.

Three major players - Occidental Petroleum (OXY), ExxonMobil (XOM), and Energy Transfer (ET) - can easily afford to raise their dividends even if crude oil prices sink far below $100 per barrel.

Occidental Petroleum, also known as Oxy, generates most of its profits from its upstream business. It produces the vast majority of its gas and oil in the U.S., making it less vulnerable to overseas conflicts. The company has raised its payout annually for five consecutive years and pays a forward dividend yield of 1.9%. It only needs WTI crude oil prices to stay above $40 per barrel to support its capex and dividends.

ExxonMobil, one of the world's largest integrated energy companies, owns upstream, midstream, and downstream assets in over 56 countries. The company plans to increase its oil and gas production by nearly 3% annually through 2030. It only needs Brent crude oil prices (the preferred metric for multinational oil companies) to remain above $35 per barrel to cover its capex and dividends.

Energy Transfer, a midstream company operating over 140,000 miles of pipeline across 44 states, delivers crude oil, natural gas, and other refined products through its pipelines and marine export terminals. As a master limited partnership (MLP), Energy Transfer blends a return of capital with its own income to pay distributions that are more tax-efficient than traditional dividends.