Since the start of 2023, Oil/Energy has been one of the worst-performing sectors. The space has witnessed a total return of (3.3%) in 2023 against the S&P 500’s gain of around 19%.

At around $73 per barrel, crude prices are more than 20% lower than the 2023 highs reached in late September, primarily due to global economic uncertainties, expanding production capabilities outside OPEC, and abundant inventories. China's economic struggles further dampen global demand forecasts. Meanwhile, natural gas is trading below $3 on high production and predictions of insipid weather-related demand.

Given the current state of affairs in the energy sector, it seems a wise investment strategy to search for stocks that provide a solid level of defense and often come paired with dividend payouts. A group of stocks that fulfill these criteria are the large caps — defined as companies with a market capitalization of $10 billion or more.

The Williams Companies (WMB Quick QuoteWMB - Free Report) , Chevron (CVX Quick QuoteCVX - Free Report) and Canadian Natural Resources (CNQ Quick QuoteCNQ - Free Report) stand out as compelling choices for investors seeking large-cap energy exposure.

Why Large Caps?

These companies possess strong financial positions, established reputations, and enjoy extensive analyst coverage. Moreover, their consistent dividend payments make them popular among income-oriented investors. Investors seeking reliability and a solid track record will find these large-cap companies appealing.

While large-cap companies may offer less growth potential compared to their smaller counterparts, they compensate with a lower level of price volatility. This characteristic makes them an excellent choice for investors who prefer a steadier investment approach, free from drastic commodity price swings.

Our Choices

The Williams Companies: Founded in 1908, Oklahoma-based The Williams Companies is a premier energy infrastructure provider in North America. The company’s core operations include finding, producing, gathering, processing, and transporting of natural gas and natural gas liquids.

The 2023 Zacks Consensus Estimate for Tulsa, OK-based WMB indicates 14.8% year-over-year earnings per share growth. Over the past 60 days, Williams saw the Zacks Consensus Estimate for this year move up 8.3%.

A major incentive for holding the WMB stock is dividend. With a quarterly payout of 44.75 cents, shares currently yield 4.8% annually, well above the Zacks Oil/Energy sector average of 3.9%. Reflecting a shareholder-friendly nature, the Zacks Rank #1 (Strong Buy) company has grown its payout by more than 5% over the last five years.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
 

Chevron: Based in San Ramon, CA, Chevron is one of the largest publicly traded oil and gas companies in the world, which participates in every aspect related to energy — from oil production to refining and marketing.

Chevron’s expected EPS growth rate for three to five years is currently 14.3%, which compares favorably with the industry's growth rate of 11.3%. The Zacks Rank #3 (Hold) company has a market capitalization of roughly $273.4 billion.

With a quarterly payout of $1.51 per share, CVX stock has a 4.2% dividend yield, above the generous sector average and significantly over the S&P 500’s 1.4% average.
 

Canadian Natural Resources: Established in 1973, Calgary-based Canadian Natural Resources is one of the largest independent energy companies in Canada. The #3 Ranked company boasts a diversified portfolio of crude oil (heavy as well as light), natural gas, bitumen and synthetic crude oil.

CNQ is valued at some $73.6 billion. The Canadian energy behemoth has a trailing four-quarter earnings surprise of roughly 2.3%, on average.

CNQ pays out a quarterly dividend of C$1, which gives it a 4% yield at the current stock price.