The entire economy of the nation is usually dependent upon the power companies that cater to it. After all, logistics, power supply, industrial power supply, commutation and almost all factions of the economy which contribute to growth and development, are driven by energy in some way or the other. So there are two substantial advantages of investing into the stocks of energy companies: firstly, you have an assured growth or rise in market price of the stocks, and secondly, you have an assured annual dividend, as energy is something that we simply cannot do without, especially in the modern world.
Classification of Energy Stocks
All the energy producing companies in the world are classified into 4 broad categories, namely, crude oil and natural gas, then you have the coal companies, then you have the power production companies and lastly, you have the green chip companies.
- Fossil oil and natural gas are the largest contributors to logistics and all kinds of transport facilities. Apart from that, they also contribute to some of the thermal energy production plants or plants which run on internal combustion engines. Thus the sales of fossil oil are quite assured and well projected, however the initial investment that you would need to purchase these stocks is quite large, as the prices of such stocks are already quite high in the market.
- Coal substantially contributes to the production of thermal energy. This stock would give you a low, yet steady inflow of dividends and the yield value. That is, the sales value, plus all dividends received, would give you a substantial profit, but it won't be sky-high.
- Green chip companies are the ones which contribute to the production of electric energy through eco-friendly and non-exhaustible avenues. Currently, these companies have a low share value and quite a low dividend payment. However, these share prices and the values of dividends are expected to rise, owing to the many green initiatives and also the energy crisis that we are quickly stepping into.
- Next off, power generation companies tend to have the maximum dividend and market values for shares. Purchasing the stock and selling it for profit always tends to be quite difficult. Though once you buy the stock, you will find that the annual dividend is excellent.
Thus you can opt for anyone or all categories of the best stocks to buy, in order to invest into energy companies.
Now while investing in energy stocks, there are some common leads that you can follow, to determine the stocks of a company that will suit you the best and that will provide you with highest yield and a great dividend. Here are some pointers:
- Find out, to whom the company caters. This is a genuine lead that would take you to the biggest profit-making energy companies. For example, a company supplying energy and electricity to the silicon valley, is always bound to make a great deal of money. Simply due to the fact that the silicon valley entirely depends upon the supply of electricity.
- Secondly, look at what the company sells. Direct electricity, diesel or gas tends to be more profitable, why? That's because a large population of people need it and are ready to pay for it, which means assured sales.
- Thirdly, check the production features of the company. How does it produce, what is the annual output, what is the annual sale, etc. A very swift relation between the production and sales usually indicates that the company will give a fantastic yield for its shares.
- Last, but not the least, you can also check other analytical data such as the inward cash flow, past market performance of the stock and also some of the projects and developments which are being initiated by the company. It must be noted that such developments can substantially affect the stock value of any energy company, due to the fact that projects serve to be revenue earners for more than a decade. Check out the P/E ratio, dividend percentage, yield percentage and market capitalization of the company, along with the debt to equity ratio.
Usually, facts for the aforementioned analysis can be found on the official website of the company or annual report of the company, as well as several other sources on the Internet.
List of Energy Stocks to Invest in 2012
The following is a brief list of the prominent energy stocks in which you can invest in for the year 2012-13 as the companies are projected to show a pretty good performance for the year. These stocks have been classified as per the type of operations, the company engages in.
- Yanzhou Coal Mining Co.
- Natural Resource Partners
- Alliance Resource Partners L.P.
- Penn Virginia Resource Partners L P
- Walter Energy Inc.
- Cloud Peak Energy Inc.
Oil & Gas Integrated Stocks
- Exxon Mobil Corporation
- Chevron Corporation
- Petroleo Brasileiro SA
- Statoil ASA
- Marathon Oil Corporation
- Questar Corporation
- YPF SA
- Legacy Reserves LP
- BP plc
- VOC Energy Trust
Oil & Gas Operations Stocks
- CREDO Petroleum Corporation
- Occidental Petroleum Corporation
- EQT Corporation
- PetroChina Company Limited
- Apache Corporation
- RAM Energy Resources Inc.
Oil Well Services & Equipment Stocks
- Genesis Energy L.P.
- Kinder Morgan Management LLC
- Mitcham Industries Inc.
- Schlumberger Limited
- Halliburton Company
- Magellan Midstream Partners L.P.
- Plains All American Pipeline L.P.
- Core Laboratories N.V.
Well other analytical measures such as the sector, sales, company and production analysis which is used to invest into other stocks also applies in this case. Analyze every stock listed here, through data available on sites like Google Finance and actual company balance sheets before investing.