As Oil Spikes Amid Russia's War, Here Are 3 Dividend Stocks to Watch

Oil prices have skyrocketed as Russia's invasion of Ukraine continues. West Texas Intermediate crude now nears $130 per barrel. Naturally, investors looking for opportunities in the oil industry will see many potential investments. But of all the oil stocks in the market, investors should focus on quality operators that offer exposure to high oil prices, but also the ability to maintain dividends when prices are low. This article will discuss three such oil stocks with high dividends that have exposure to high oil prices. High Yield Oil Stock Pick No. 1: BP plc BP is one of the largest oil and gas corporations in the world. It is a fully integrated company and operates in two segments: upstream and downstream, which is mostly refining. In early February, BP reported financial results for the fourth quarter of fiscal 2021 showing the company greatly benefited from the rally of the prices of oil and gas to multi-year highs and improved refining margins, thanks to the recovery of the energy market from the pandemic. As a result, BP increased its earnings per share from $0.99 in the third quarter to $1.23. This level of EPS, which is the highest for BP in the last seven years, is impressive and exceeded analysts' consensus by $0.09. BP reduced its debt for a seventh consecutive quarter and reiterated that it expects to keep raising its dividend by 4% per year, if the price of oil remains around $60 or higher. BP has greatly improved its portfolio in recent years via the addition of low-cost reserves. Last year, BP completed its six-year growth program, which delivered 900,000 barrels of oil equivalent per day. Another growth catalyst is renewable energy. BP announced a major shift in its strategy in 2020. BP will boost its investment in renewable energy sources 10-fold going forward. In the meantime, BP returns lots of cash to shareholders each year. In such a scenario, BP also expects to repurchase $1 billion of shares per quarter (~4% per year). The company also returns significant cash in the form of dividends. Shares currently yield 4.5%. High Yield Oil Stock No. 2: Exxon Mobil Exxon Mobil is a diversified energy giant and the largest publicly traded oil company. In 2021, the upstream segment generated over 60% of its total earnings, which means it has significant exposure to oil prices. Exxon's competitive advantage is its unparalleled scale and its enviable expertise in the energy sector. The standard technical procedures followed by most oil companies have been written by Exxon. It is also impressive that other oil companies drilled about 40 dry holes in Guyana whereas Exxon has a nearly 90% success rate in this area. Exxon's diversified business model has shown exceptional fortitude in good times and bad. When commodity prices are high, Exxon takes full advantage on the upstream side. When prices are low, the downstream and chemical segments usually offer a good deal of protection. In early February, Exxon reported financial results for the fourth quarter of fiscal 2021 showing that the oil giant continued to recover strongly from the pandemic. It upped its production 2% over the prior year's quarter and greatly benefited from the sustained rally of the prices of oil and gas. As a result, Exxon grew its adjusted EPS from $0.03 in the prior year's quarter to $2.05, the highest in more than five years. Exxon raised its dividend by 1% in the fourth quarter of 2021, extending its dividend growth streak to 39 consecutive years. Exxon Mobil is a Dividend Aristocrat, a group of 66 stocks in the S&P 500 Index that have increased their dividends for 25 or more consecutive years. Shares currently yield 4.2%. Exxon has about 10 billion barrels of oil equivalent in the Permian and expects to reach production of more than 1.0 million barrels per day in the area by 2025. Guyana, one of the most exciting growth projects in the energy sector, is the other major growth project of Exxon. The oil major recently announced some major discoveries in the area and thus it boosted its estimated reserves. Exxon has more than tripled its estimated reserves in the area, from 3.2 billion barrels in early 2018 to about 10.0 billion barrels now. High Yield Oil Stock No. 3: Kinder Morgan Kinder Morgan is among the largest energy companies in the U.S. It is engaged in storage and transportation of oil and gas, and other products. It owns an interest in or operates approximately 83,000 miles of pipelines and 144 terminals. Its pipelines transport natural gas, refined petroleum products, crude oil, carbon dioxide and more. Kinder Morgan does not have as much exposure to oil prices as the major oil producers, but it does have some oil exposure, particularly in its carbon dioxide segment. Kinder Morgan also has significant exposure to natural gas, which is also rallying alongside oil prices. Kinder Morgan's biggest growth catalysts for the future are new pipeline and terminals projects. It is also the largest independent transporter of petroleum products. On Jan. 19 Kinder Morgan reported its fourth-quarter financial results that showed the company reported EPS of $0.24. The fourth quarter's distributable cash flow fell to $1.09 billion from $1.25 billion in the year-ago period. Revenue increased 42% to $4.43 billion year-over-year. Meanwhile, the company's natural gas transport volumes fell 3% year-over-year, total refined product volumes increased 9% year-over-year, and crude and condensate pipeline volumes decreased 3% year-over-year. For 2022, Kinder Morgan expects to produce a net income attributable to KMI of $2.5 billion, distributable cash flow of $4.7 billion, and adjusted earnings before interest, taxes, depreciation, and amortization of $7.2 billion, and aims to end 2022 with a 4.3-times net debt-to-adjusted EBITDA ratio. While oil stocks have been notable market laggards for years because of persistently low oil prices, the Russia's attack on Ukraine has caused oil prices to jump. BP, Exxon Mobil, and Kinder Morgan continue to reward shareholders with high dividend yields, and their share prices should react positively to any continued rally in oil prices.

As Oil Spikes Amid Russia's War, Here Are 3 Dividend Stocks to Watch

Let's look at the top oil stocks with high dividends and with exposure to high oil prices.

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