With the market seemingly unable to decide which trajectory it wants to take, so-called safe energy stocks may be your best bet. Irrespective of whatever happens to the economy, mobility and power represent enduring themes in modern society. Thus, the energy sector makes plenty of sense.
Should the economy manage to power forward through the troubles, both people and businesses will consume resources. By logical deduction, this kinesis should be beneficial to stable energy stocks. However, even under recessionary circumstances, various entities will transact goods and services. Again, just by following the logic, this backdrop should benefit energy-related enterprises.
Of course, nothing in the capital market is literally safe, as in completely risk-free. But that shouldn’t be used as a “whataboutism” to defeat the theme here. Let’s face it, in America, you’re taking a risk just by walking out your front door.
On that note, below are safe energy stocks to buy.
Exxon Mobil (XOM)
When discussing safe energy stocks, integrated oil and gas giant Exxon Mobil (NYSE:XOM) comes to mind. No, I wouldn’t call the enterprise absolutely risk-free; again, no such thing exists in the market. However, faced with significant geopolitical turmoil – specifically oil production cuts by certain resource-rich nations that will extend to the end of the year – paints an urgent narrative. Basically, we must focus on energy resilience.
Therefore, I’m not that worried about the push for renewable energy competing with hydrocarbons. Factoring in elements such as population growth, diversification rather than a wholesale pivot may be the key theme moving forward. Also, XOM makes a great case for stable energy stocks thanks to its financials. Aside from an understandable miss in 2020, Exxon has been consistently profitable.
For investors, the immediate benefit is passive income. Presently, the company offers a forward yield of 3.84%. As well, it features 41 years of consecutive dividend increases along with a very reasonable payout ratio of 39.69%.
Analysts rate XOM a moderate buy with a $128.75 price target, implying 18% upside potential.
Kinder Morgan (KMI)
On a surface level, Kinder Morgan (NYSE:KMI) doesn’t immediately strike onlookers as one of the safe energy stocks. Since the start of the year, KMI slipped more than 6%. In the trailing five years, it’s gone nowhere, losing almost 4% of equity value. However, as an infrastructure play, Kinder Morgan’s giant midstream business – which commands approximately 83,000 miles of pipelines – is too big to ignore.
To be fair, the slowdown in the consumer economy along with the ongoing work-from-home directive has negatively impacted KMI’s growth. In 2022, the company posted revenue of $19.2 billion. On a trailing-12-month (TTM) basis – inclusive of the third quarter – sales sit at $15.88 billion. Granted, those are not exciting statistics.
Nevertheless, the one to focus on is consistent profitability. Further, social shifts may reinvigorate sentiment. For example, more companies will likely mandate return-to-office policies, especially as the productivity crunch accelerates. That might help KMI become one of the stable energy stocks.
So far, analysts peg shares as a moderate buy with a $20.78 target, projecting 23% growth.
NextEra Energy (NEE)
While an exclusive integration of clean and renewable energy sources might not be in the cards for the near future, investors may want to consider NextEra Energy (NYSE:NEE). For full disclosure, one must stake creative liberties to label NEE as a candidate for safe energy stocks. Since the January opener, NEE has plunged almost 29%, which is startling.
As our own Louis Navellier pointed out, tighter monetary policy has hurt NEE. Subsequently, the market expert views shares dubiously. At the same time, speculators might look at the trade as a substantially de-risked opportunity. Basically, the bad news may have been baked into the stock. Notably, in the trailing one-month period, shares swung up almost 14%.
In terms of the financials, NEE now trades at 15.84x trailing earnings. At the end of last year, NEE’s multiple clocked in at 39.81X. In that sense, the valuation is getting progressively more attractive. Also, the broader relevance of renewables might make NEE one of the safe energy stocks to gamble on.
Finally, analysts rate NEE a strong buy with a $72.64 target, implying over 21% upside.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
