Notorious volatility is an integral part of the energy sector, as reflected in the wild swings in oil prices since the onset of the coronavirus pandemic. However, due to some key factors, dividend-paying stocks in the same space are relatively less volatile, thereby making Marathon Petroleum Corporation (MPC Quick QuoteMPC - Free Report) ,EOG Resources, Inc. (EOG Quick QuoteEOG - Free Report) and Phillips 66 (PSX Quick QuotePSX - Free Report) well-poised to gain.

Extremely Volatile Energy Market

We should never forget how oil prices behaved since the beginning of the coronavirus outbreak. The initial pandemic period, when there were no vaccines, saw an environment of heightened uncertainties. The commodity’s price plunged to a negative $36.98 per barrel on Apr 20, 2020.

However, with the rapid developments of vaccines by the scientists, which in turn led to gradual opening of the economies, the pricing scenario of West Texas Intermediate (WTI) crude improved drastically over time to reach $123.64 per barrel on Mar 8, 2022. Oil price data is per the U.S. Energy Information Administration.

Dividend Stocks to the Rescue

Overall oil pricing scenario seems scary, which could easily deter an investor from allocating money to energy companies. Despite this volatility constraint, investors could consider dividend-paying companies belonging to the industry. This is because, generally, companies with stable dividend-paying history are usually relatively less volatile than stocks with no dividend history. It is expected that companies that have been rewarding stockholders with dividends will try their best to continue paying at the same pace or higher, making the stocks attractive and less volatile to vagaries of the market.

We have employed our Stock Screener to zero down three such stocks. One of the stocks sports a Zacks Rank #1 (Strong Buy), while another two stocks carry a Zacks Rank #2 (Buy) or Zacks Rank #3 (Hold). With a dividend yield of more than 2%, all the companies have raised dividends over the past five years. Moreover, with a payout ratio of less than 60%, the companies ensure sustainability with enough scope for future dividend increases.

3 Stocks to Gain

Marathon Petroleum Corporation: As a leading, integrated, downstream energy player, Marathon Petroleum is the operator of the largest refining system in the nation. Handsome margins and throughput in all regions are aiding MPC. #1 Ranked Marathon Petroleum pays out a quarterly dividend of 58 cents ($2.32 annualized) per share, which gives it a 2.36% yield at the current stock price. (Check Marathon Petroleum’s dividend history here).  

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

EOG Resources, Inc: In the United States, EOG Resources is a leading exploration and production player. Since its transition to premium drilling, EOG boasted that it has returned roughly $10 billion in cash to shareholders. EOG Resources, with a Zacks Rank of 3, pays a quarterly cash dividend on the common stock of 75 cents ($3.00 annualized) per share. EOG also declared a special dividend of $1.50 per share, likely to be paid on Sep 29, 2022, to stockholders on record as of Sep 15, 2022. (Check EOG Resources’ dividend history here). 

Phillips 66: Phillips 66 is a diversified energy manufacturing and logistic player having presence in Midstream, Chemicals, Refining, and Marketing and Specialties businesses. With a strong focus on disciplined capital allocation and maintaining financial strength, PSX is well-positioned to continue rewarding shareholders with dividend growth. Zacks #2 Ranked Phillips 66 pays a quarterly cash dividend on the common stock of 97 cents ($3.88 annualized) per share. (Check Phillips 66’s dividend history here).