Energy is the best-performing stock-market sector this year. Given today’s strong economic growth and high inflation, many believe oil prices could remain at current high levels for years or maybe even more higher.
That steep but brief plunge on the chart is April 2020, when demand for oil tanked during the early days of the COVID-19 pandemic, storage sites were full and those holding front-month futures contracts essentially had to pay people to take the oil off their hands.In a report provided to clients on Feb. 10, analysts at BCA Research said they believe prices will rise over the next decade in the face of increasing demand and declining supplies.
Here’s a comparison of total returns, with dividends reinvested, for the three ETFs and the SPDR S&P 500 ETF Trust SPY, -1.80% through Feb. 9: From the forward P/E ratios, the energy ETFs might be considered cheap relative to SPY, however, they “earned” investors’ mistrust during the long decline of stock prices from mid-2014 through early 2016, and, of course, early in the pandemic.
First screen: dividend yields Given what appears to be a healthy environment for oil prices, a broad round of dividend cuts, such as those we saw early in the pandemic, appears unlikely. With that in mind, the first screen of the 63 stocks held by the three ETFs is simply by dividend yield. Also note that the highest-yielding stocks on the list are American depositary receipts of Petroleo Brasileiro SA common shares PBR, +1.27% and preferred shares PBR.A, +0.82%. Unlike traditional preferred stocks issued in the U.S., this Petrobas preferred issue has no par value.
But it's yesterday's technology. Why would you want to invest in the past?
Sounds like the signal to sell oil to me...