The upcoming presidential election may have a major impact on energy stocks. That’s because the energy plans of President Donald Trump and Democratic candidate Joe Biden are almost the opposite. Therefore, this means that the winner will have a huge impact on the industry in the next four years.
However, no matter who has a winner on election night, some energy stocks should win.The three companies that our energy contributors think can be successfully developed are Royal Dutch Shell (New York Stock Exchange: RDS.A)(New York Stock Exchange: RDS.B), total (New York Stock Exchange: TOT)with NextEra Energy Partners (New York Stock Exchange: NEP). This is why.
Stay away from oil
Daniel Foelber (Royal Dutch Shell Company): Buying oil giant stocks before the presidential election has its risks. The US energy policy on fracking and carbon emissions may change depending on which party controls the executive branch and the Senate. But in the case of Shell, we have reason to believe that the company will benefit no matter who wins the election.
In a recent interview published on the Shell website, CEO Ben van Beurden discussed Shell’s plan to reduce emissions, cut oil production, and close all but 10 refineries or fewer. Plans to increase the contribution to carbon neutral natural gas and liquefied natural gas (LNG), renewable energy and other alternative energy sources. After Shell turned to carbon neutrality, part of the discussion involved layoffs of thousands of jobs in the next two years. The layoffs are the latest saving measures in a series of reductions this year, including reducing dividends by two-thirds, suspending stock buybacks and cutting spending. Together, they will save the company more than $27 billion annually.
If Washington is favorable to the oil shift or prices rebound, Shell’s oil and gas business will benefit in the short term. If Washington is dissatisfied with oil and oil prices continue to fall, Shell can use oil and gas as a failed enterprise to further verify its strategic shift. Shell’s stock price is close to a 20-year low, with a dividend yield of 5.2%, and Shell seems to have been abandoned by the market. Recovery may take some time, but Shell may sell it at a discount.
Be one step ahead
Ruben Gregg Brewer (total): The French integrated energy giant Total has been buying clean energy and power assets for many years. Although these non-oil businesses only account for 5% of the company’s energy sales, the goal is to increase this proportion to 15% in the next ten years or so. At the same time, Total will increase its exposure to natural gas as a transitional fuel from 40% to 50%. The position of oil in the asset portfolio will drop from 55% to 35%, but throughout the process, Total plans to refocus on low-cost assets so that it can compete even if oil prices are dying. Total is moving its business in a cleaner and greener direction.
This is great, but what about the US election? By 2019, less than 15% of Total’s oil and gas production will come from the Americas. Basically, the US election will not have much impact on Total’s business methods. No matter who wins, Total positions itself as a leader in the energy industry. Yes, oil prices are painfully low at the moment, but this is likely to be an investment opportunity rather than a major long-term threat to Total’s business. As long as the average oil price is around US$40 per barrel (now slightly below this level), the board of directors has stated that the dividend support of Total’s dividend yield of more than 10% will remain unchanged.
Strong dividend growth plan
Matt Dillallo (NextEra Energy Partner): There is a misplaced belief among investors that under another Trump administration, oil stocks will flourish, while in the Biden era, renewable energy will flourish. Over the past four years, the opposite has happened, as the global economy is slowing the transition to clean energy, and renewable energy stocks have outperformed the fossil fuel companies under President Trump. Therefore, no matter who presents a winner on election night, these companies will continue to win.
NextEra Energy Partners is a clean energy company that is poised to thrive in the next four years. Producers of natural gas pipelines and renewable energy currently expect their dividends to grow at an annual rate of 12% to 15% by 2024. Thanks to the recent promotion of acquisitions and expansion projects, the company has enough motivation to achieve next year’s plan.
At the same time, it has a large number of fuel sources to power plans beyond 2021.One of the biggest collaborations is with utility Next generation energy (New York Stock Exchange: NEE). The company has an extensive portfolio of natural gas pipelines and renewable energy assets, which are currently in operation and under construction, so they can be owned by its affiliates. In addition, NextEra Energy Partners can also complete other third-party acquisitions, such as last year’s acquisition. Mead Pipeline Trading And approved new organic expansion projects.
Coupled with NextEra’s current 3.7% growth potential, this clean energy infrastructure company may generate annual total returns in the mid-15s. Regardless of the outcome of the election, this upside potential makes it a large number of stocks that can be bought before polling.