The Oil/Energy market has been roiled by concerns over a slowdown in global economic activity, particularly the decline in fuel demand in China. Both the U.S. and the global benchmark prices recently fell to their lowest levels in more than two years.  

Sustained volatility, combined with potential OPEC+ production increases, threatens to strain energy companies’ revenues and margins in the coming quarters, creating a challenging outlook for the operators.

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 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 Kinder Morgan (KMI Quick QuoteKMI - Free Report) stand out as compelling choices for investors seeking large-cap energy exposure.

Why Large Caps?

These companies possess strong financial positions and 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

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 natural gas and natural gas liquids.

The Tulsa, OK-based WMB beat the Zacks Consensus Estimate for earnings in each of the last four quarters, the average being 11.3%. Williams has a market capitalization of roughly $56.3 billion.

A major incentive for holding the WMB stock is dividend. With a quarterly payout of 47.50 cents, shares currently yielding 4.1% annually, well above the Zacks Oil/Energy sector average of 3.8%. Reflecting a shareholder-friendly nature, the Zacks Rank #3 (Hold) company has hiked its payout by more than 4% 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 beat the Zacks Consensus Estimate for earnings in two of the last three quarters. The #3 Ranked company has a market capitalization of roughly $269.8 billion.

With a quarterly payout of $1.63 per share, the CVX stock has a 4.4% dividend yield, above the generous sector average and significantly over the S&P 500’s 1.2% average.

Kinder Morgan: Houston, TX-based Kinder Morgan is a leading midstream energy infrastructure provider in North America. The company operates pipelines across 83,000 miles to transport natural gas, crude oil, condensate, refined petroleum products, CO2 and other products.

Kinder Morgan – carrying a Zacks Rank of 3 - is valued at some $49.2 billion. The energy infrastructure provider‘s 2024 earnings per share indicate 11.2% year-over-year growth.

KMI pays out a quarterly dividend of 28.75 cents, which gives it a 5.2% yield at the current stock price.