ExxonMobil is a solid dividend stock, but so are these high-yield stocks, which are down 4% and 15% over the past year.

ExxonMobil (XOM 0.13%)the largest US energy stock by market cap, has been a reliable dividend stock for decades. Despite the volatility of oil and natural gas prices, Exxon has paid and increased its dividend for 42 consecutive years.

As Exxon knocks on the door of an all-time high, other companies in the oil, gas and renewable energy industries have seen their stock prices fall. Here’s why Chevron (CVX 0.02%), Devon Energy (DVN 0.91%)and Brookfield Renewables (BEPC -0.33%) (BEP -0.49%) stand out as the best high-yielding dividend stocks to buy now.

Image source: Getty Images.

Like Exxon, Chevron has been a steady passive income powerhouse

Daniel Foelber (Chevron): In a vacuum, Chevron reported a good quarter. But not relative to its US peer, ExxonMobil.

Everything is working for Exxon right now, which is why it has outperformed Chevron over the past year.

XOM data by YCharts

Exxon just reported its best second quarter results in over a decade. Its acquisition of Pioneer Natural Resources was a success, while the similarly sized acquisition by Chevron Hess it is full of uncertainty.

Hess, Exxon and CNOOC are part of a consortium drilling offshore Guyana in the coveted Stabroek block. The low cost of production and rich reserves are a key reason why Chevron wanted to buy Hess in the first place. However, Exxon and CNOOC are resisting the acquisition and pushing the case into arbitration proceedings.

On the earnings call, Chevron reiterated its confidence that the deal will be completed. But that is largely based on the shareholders’ own vote. “In the absence of Hess, we have a 10% increase in free cash flow,” Chevron CEO Michael Wirth said on the second-quarter earnings call. “We have ongoing projects and numerous pools in the world and in our chemicals businesses. So we really focus on that and create value there. But if another opportunity presented itself that would be compelling, we are certainly in a position to consider it.”

For several quarters, Chevron has argued that Hess is a good fit but is still thriving without him. But the market hates uncertainty, and having a $53 billion deal up in the air is just another unchecked box that may cause some investors to prefer Exxon over Chevron right now. After all, it’s been nearly 10 months since Chevron first announced plans to buy Hess. It takes time to integrate an acquisition, raising the question of whether Chevron would be better off throwing in the towel and buying another exploration and production company.

In a way, it does just that by accelerating the pace of redemptions. As you can see in the chart, Chevron is now buying back roughly triple the amount of stock it was buying before the pandemic.

CVX Stock Redemptions (TTM) data by YCharts

Companies make acquisitions to increase profits. But stock buybacks accomplish the same goal, just in a different way. Instead of increasing earnings per share, buybacks reduce the number of shares outstanding. With fewer shares to go, there are higher earnings per share.

Chevron has an incredibly efficient business. If the Hess deal falls through, it wouldn’t be a bad idea to do a massive buyout. Chevron stock isn’t too expensive and is undoubtedly a good value compared to riskier plays in the oil space.

With 37 consecutive years of dividend hikes and a 4.5% yield, Chevron stands out as a great dividend stock to consider now.

A cash flow that generates oil and gas stocks to buy

Lee Samaha (Devon Energy): It’s hard to know exactly what Devon Energy will pay out in dividends this year. This is mainly because it has a flexible policy of returning capital to shareholders. Management aims to return 70% of its free cash flow through a fixed dividend of $0.22 per share per quarter, a variable dividend payout and opportunistic share repurchases. The remaining 30% is earmarked for balance sheet improvements, such as the $2.5 billion debt reduction program announced at the announcement of the $5 billion acquisition of Grayson Mill, adding to its Williston Basin assets in North Dakota.

Assuming a worst-case scenario of a fixed dividend of $0.88 per year, that yields a dividend yield of 2.1% at the current price. However, the final total dividend (which includes the variable dividend) is $2.05, implying a dividend yield of 4.95%.

While it’s difficult to know what Devon will pay out this year, not least because the falling share price makes share buybacks more attractive, management is clear they expect significant free cash flow generation next year.

For example, based on an oil price of $70 per barrel at the time the Grayson Mill deal was announced, management said it expected an FCF yield of 9%. Since the stock price was around $47 at the time, and the stock price is $41.34 at the time of writing, interpolating the numbers suggests a 10% FCF yield at the current price.

If 70% of FCF goes towards returning cash, then Devon could, at least theoretically, trade on a 7% dividend yield. While no share buybacks are highly unlikely, there should be plenty of cash left over for an extremely attractive dividend, provided oil prices behave.

Stable cash flows support Brookfield Renewable’s high dividend yield

Scott Levine (Brookfield Renewable): The appeal of high-yielding dividend stocks is undeniable. But an industry leader that offers investors prodigious passive income? That’s much more appealing. This is the case of the green power plant Brookfield Renewable. Operating a global portfolio of renewable energy assets, Brookfield Renewable generates consistent cash flows through its long-term power purchase agreements with customers, providing ample support for its dividend, which currently stands at a forward yield of 5.1 %.

With an average contract duration of 13 years, Brookfield Renewable has an excellent outlook on future cash flows. This luxury helps the company properly plan capital expenditures such as acquisitions and dividends. This is clearly illustrated by the significant degree to which the company’s funds from operations have supported the dividend in the past.

BEP FFO per share (annualized) data by YCharts.

In the years ahead, management intends to maintain the same responsible approach to the dividend. While targeting annual funds from operating growth of 10% per share, management expects to grow the payout by 5% to 9% annually. And if that’s not enough to assuage the fears of conservative investors who question Brookfield Renewable’s financial health in light of its high dividend, perhaps they’ll feel better after learning about the company’s investment-grade balance sheet, rated BBB+ by Standard & Poor’s.

It’s not just income investors, nor renewable energy enthusiasts who will find Brookfield Renewable appealing right now. With the stock trading at 4.4 times operating cash flow — a discount to the 5.7 multiple of its five-year average cash flow — value investors will also be encouraged to fuel their portfolios with Brookfield Renewable right now.