Don’t look now, but while investors are all gaga about momentum stocks, the energy refiners are stealing the show, explains Bryan Perry, dividend expert and editor of Cash Machine.
The world is awash in crude capacity and every time the price of WTI crude trades up to between $55-$60 per barrel, the U.S. and global spigots get turned on to full output.
This saturates the market until there are coordinated efforts by OPEC and non-OPEC nations to cut production to stabilize prices. Rest assured, there is no shortage of oil and won’t be anytime soon.
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On the other hand, there is incredibly tight capacity within the refining sector as you can count the number of publicly traded refiners on one hand. The top 10 holdings in the VanEck Vectors Oil Refiners ETF (CRAK) account for 60.83% of total assets.
And while this ETF has moved up 20% in the past two months, it’s the performance of some of the individual stocks, which pay excellent dividend yields and are hitting new 52-week highs, that deserve mention.
Phillips 66 (PSX) has rallied 43% in five months and still pay a 3.15% dividend yield. Valero Energy (VLO) has gained 38% during the same period and still offer a fat 3.63% yield. Marathon Petroleum (MPC) gained 51% during this period and pay a generous 3.12% dividend yield.
My view is that these three stocks are the very best to own and trade. For real yield-hungry investors, CVR Energy (CVI), with its 7.02% dividend yield, is hard to beat. In fact, Carl Icahn owns a majority stake in the company.
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But whether one buys into a single stock or all four, there is clearly a stealth bull market in the oil refining business which shows that sub-sectors of larger sectors can flourish.
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