3 Top High-Yield Stocks to Buy in September

If you want high-yielding stocks, the oil and natural gas sector offers plenty of great options worth considering as part of a diversified portfolio. The challenge, of course, is finding the right ones.

If you’re looking for high-yielding stocks to add to your portfolio this September, we recommend considering Devon Energy (DVN -0.49%), Diamondback Energy (FANG -0.85%)and/or Vitesse Energy (VTS 0.47%). All three are excellent candidates for dividend stocks that deserve a closer look. Here’s why.

1. Devon Energy (4.5% dividend yield)

Shares in the US oil and natural gas producer are trading slightly lower year to date, despite oil prices holding up much better than many investors expected. In addition, Devon’s focus on investing in its core assets in the Delaware Basin has improved productivity, and the company has already upgraded its production volume estimates twice this year, implying a 5% increase over its initial guidance .

The company is entering the sector’s acquisition frenzy of late, announcing a $5 billion purchase of Grayson Mill’s Williston Basin assets for a combination of cash and stock. Management believes the transaction will expand its oil equivalent production by 15% and free cash flow by a similar amount.

The market has not reacted so positively to the plan, possibly because it is a relatively conservative business and Devon pays for producing assets rather than reserves. It’s a strategy that could backfire if oil prices fall in the medium term. However, Devon’s investors and management are unlikely to invest in the sector if they are worried about a significant drop in oil prices.

Indeed, if oil prices stay where they are now, Devon will generate significant amounts of cash flow to pay down debt and continue to return extraordinary dividends to investors for years to come. Devon’s quarterly dividend of $0.44 per share fluctuates from quarter to quarter (both up and down) and currently yields 4.5%, beating the sector average of 3.75% .

2. Diamondback Energy (5.5% dividend yield)

Unlike Devon Energy, shares of Diamondback Energy have risen significantly this year, with a nearly 26% increase in share price. As with Devon Energy, Diamondback has agreed to a deal to add significant energy assets. In this case, Diamondback has a merger agreement with Endeavor Energy Resources. Diamondback will contribute 117.3 million shares and $8 billion in cash to own 60.5 percent of the combined company.

However, unlike the Devon Energy deal, the market has warmed to it, possibly because it adds Permian assets to Diamondback’s existing assets.

As the chart below shows, oil production in the Permian Basin has expanded significantly more than in the Bakken over the past decade, and investors are willing to pay a premium for Permian assets.

Total oil production data from the Permian region, according to YCharts.

In addition, the deal brings significant opportunity for synergy generation — management is targeting $550 million in annual synergies, representing more than $10 billion in net present value if discounted at 10% over the next 10 years.

While management intends to reduce its “commitment to return capital to at least 50% of free cash flow to shareholders from at least 75% of free cash flow previously” as a result of the deal (implying some pressure on the dividend ), growth in assets and production (which will more than double with the addition of Endeavor) support significant dividend growth going forward.

Diamondback’s quarterly dividend of $2.34 per share fluctuates from quarter to quarter (both up and down) and currently yields 5.5%, beating the sector average of 3.75% .

3. Vitesse Energy (8.3% dividend yield)

Back to the Bakken oil field, oil and gas exploration and production company Vitesse Energy is an interesting small-cap stock with a management team dedicated to generating dividends for investors. It has an unusual business model: it does not operate its own wells. Instead, its experienced executive team uses a proprietary system and the experience of its management to invest in minority interests in oil and gas assets operated by larger partners.

Management says it invests in 30% to 55% of rigs drilling in the Bakken, including those operated by Grayson Mill; as noted above, Devon Energy is purchasing these assets. In addition, management uses a hedging strategy to try to insulate the risk in the stock against management’s ability to identify and invest in productive wells rather than relying on rising oil prices.

It’s an interesting strategy and places a heavy burden on management, both in wise investing and successful hedging. As such, it’s probably not a stock to overload. But management has a good track record, and the company has already raised its dividend sizable this year. So, it is a worthy option for investors looking to diversify their energy holdings and benefit from significant dividends as well.

Vitesse’s quarterly dividend of $0.52 per share has been flat or rising since it began paying one in early 2023. It currently yields 8.3%, more than double the sector average.