Veteran energy analyst sees 'generational' opportunity in big oil stocks

Crude oil prices have rallied by more than 20% this year, while the S&P Energy Index (XLE) has gained only 10%. That, combined with historically rich dividends from big oil companies, is providing an irresistible buying opportunity, says one veteran oil analyst.

Since May, the median trailing dividend yield on the S&P Energy Index has been the highest of any sector in the S&P 500 -- beating out traditional high dividend-payers like real estate and utilities, according to Bloomberg data. It currently stands at around 3.5%.

“Finding dividend prices in majors like this is just an opportunity that I think is generational,” said Dan Dicker in an interview with Yahoo Finance’s On the Move. Dicker is founder of The Energy Word, an interactive subscription webinar for investors.

Exxon Mobil’s (XOM) dividend yield is about 4.6%, while the U.S. shares of Royal Dutch Shell (RDS.A) and BP (BP) pay out yields of 5.9% and 6.3%, respectively.

“These are as solid as you can get. And it's not like no one's going to use oil,” Dicker said. “Despite all that talk about peak demand, which I think is for the most part nonsense, at least over the course of the rest of my lifetime…[Big oil stocks] are the places to be, without question.”

Dicker said that despite geopolitical threats to supply, including rising tensions in the Strait of Hormuz related to U.S.-Iran tensions, oil prices have not moved as much as they might have historically. That’s in part due to robust global demand and in part to consistent supply, with disruptions causing only marginal hits to output and prices.

“There's just generally a lot of just passivity towards these kinds of geopolitical dust-ups until they actually mean something. Now, when that happens that's anybody's guess. But for the most part, most of the traders, mostly investors feel that, ultimately, they don't mean much,” he said.


Julie Hyman is the co-anchor of On the Move on Yahoo Finance.

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