3 Top Energy Dividend Stocks for Steady Passive Income

Despite a volatile year for oil prices, the energy sector remains a top draw for dividend investors in 2024. The world needs a lot more energy, and there simply aren't enough supplies to go around - which has created a steady bid for oil and gas stocks around their current, historically discounted levels. Plus, oil still tends to spike in response to flaring geopolitical conflicts, making cheap energy dividend stocks one way to help hedge against broader turmoil. With these trends in mind, dividend-paying energy companies are still a solid choice for investors seeking steady income.

Among the energy stocks to consider are Noble Corporation (NE), Baker Hughes (BKR), and ONEOK (OKE). These companies aren't just top-rated by analysts; they're also top income picks right now - whether because they offer good value (NE and BKR are priced attractively), or fat yields (OKE provides an above-average yield, even by energy sector standards). Let's dive into why these energy dividend stocks are set to deliver reliable income now and in the future.

#1. Noble Corporation (NE)

Noble Corporation (NE) is a big player in the offshore drilling game, helping oil and gas companies around the world get the resources they need. They focus on making sure their drilling services are efficient, reliable, and safe.

NE stock is down 33% on a year-to-date basis, and trades near its newly set 52-week low of $31.

Given this underperformance, Noble stock looks cheap compared to its peers, with a forward price/earnings (P/E) ratio of 10.18 - a discount to the energy sector median valuation of 11.91.

Plus, NE offers a forward dividend yield of 6.17%, which is higher than the energy sector average. In fact, as of the Q3 dividend increase to a quarterly payout of $0.50 per share, Noble has highest dividend payout in U.S. oilfield services sector.

In their second quarter of 2024, Noble did well financially, boosting their contract drilling services revenue to $661 million from $612 million in the previous quarter. Their net income more than doubled to $195 million, and adjusted EBITDA jumped to $271 million. NE improved fleet utilization to 78%, up from 72% earlier this year, and CEO Robert Eifler noted a big improvement in earnings driven by key contract startups.

With Noble's next earnings report due on Nov. 5, analysts are targeting EPS of $0.90 per share, up about 3% year over year.

Noble has been making moves to expand their footprint. They just closed the acquisition of Diamond Offshore Drilling, which gives them the largest fleet of advanced drillships, and adds about $2 billion in backlog work. 

Analysts are optimistic about Noble's future, with a "Strong Buy" rating overall. Out of 9 analysts, 7 say "Strong Buy," while 2 suggest a “Hold.” The average price target is $54, meaning there’s an expected upside potential of about 68.9% from Monday's close.

#2. Baker Hughes (BKR)

Valued at $37.4 billion, Baker Hughes Company (BKR) is a big name in energy tech. Their operations span everything from oilfield services and equipment to turbomachinery and digital solutions. Baker Hughes is all about coming up with new tech to make things run smoother, cheaper, and greener across the energy industry.

BKR stock is up 9.4% since the start of 2024, and trades not far from July's 52-week high of $39.05. 

BKR's forward P/E ratio of 16.42 compares favorably to its historical average valuation of 30.71, suggesting the shares are reasonably valued at current levels. Baker Hughes also offers a forward dividend yield of 2.24%, paying out $0.21 per share each quarter. 

Baker Hughes reported a strong third quarter in 2024, reporting $6.9 billion in revenue — a 4% increase from last year. Record adjusted EBITDA of $1.208 million was up 23% from the previous year, and EPS reached $0.77. On an adjusted basis, earnings of $0.67 per share topped estimates. Baker Hughes also reported orders totaling $6.7 billion, including $2.9 billion in Industrial & Energy Technology orders, showing steady demand.

Two significant developments underscore Baker Hughes' growth strategy and technological leadership. First, the company partnered with Repsol(REPYY) to develop next-generation AI capabilities for field production optimization, aiming to enhance operational efficiency and reduce emissions. Additionally, Baker Hughes launched CarbonEdge, an end-to-end digital solution for carbon capture, utilization, and storage (CCUS) operations, positioning the company at the forefront of the energy transition.

Eighteen out of 20 analysts rate BKR stock a "Strong Buy," with one more saying "Moderate Buy," and one recommending a "Hold." The average price target is $43.47, suggesting a potential 16.2% increase from its current price.

#3. ONEOK Inc. (OKE)

ONEOK, Inc. (OKE) is a big name in the midstream energy game, with one of the best natural gas liquids (NGLs) systems in the country. They handle everything from gathering and processing to storing and transporting natural gas (NGX24) and NGLs. 

Outperforming OKE stock is up 36.7% on a YTD basis, and set a new high of $98.43 as recently as Oct. 21.

With a market cap of $56.41 billion, the company's forward P/E of 19.15 indicates that OKE isn't exactly cheap at current levels. However, ONEOK offers a healthy forward dividend yield of 4.10%, with a quarterly payout of $0.99 per share and over 25 years of dividends. 

ONEOK's second quarter 2024 results were better than expected, with operating earnings per share of $1.33 beating the consensus estimate by 12.7%. Revenues hit $4.89 billion, up 31.1% from the previous year, while adjusted EBITDA jumped an impressive 65.5% to $1.62 billion. The company is sticking to its 2024 guidance for net income between $2.73-$3.03 billion.

Keep an eye on ONEOK this week, as the company is scheduled to announce its third-quarter earnings after the close on Oct. 29. Analysts forecast EPS of $1.23 for the quarter, representing a 24% increase compared to the same period last year.

Two big moves highlight ONEOK's growth plans. First, they completed the acquisition of Global Infrastructure Partners' 43% stake in EnLink Midstream (ENLC) for $3.3 billion, expanding their midstream reach. Second, ONEOK announced plans to build a new 230-mile pipeline connecting Mid-Continent and Gulf Coast refined products supply with the Denver area, a $480 million project set to be finished by mid-2026, boosting their transportation capabilities and market access.

Analysts are mostly optimistic about ONEOK, with a consensus "Moderate Buy" rating. Out of 16 analysts, 9 say "Strong Buy," 1 suggests a "Moderate Buy," and 6 recommend a "Hold." The average price target of $96.73 is nearly flat with the current trading price, hinting that the stock might be fairly valued right now. However, the Street-high target of $111 suggests expected upside potential of 15.6%.

Conclusion

In summary, Noble Corporation, Baker Hughes, and ONEOK offer compelling opportunities for investors seeking steady passive income in the energy sector. Each company brings unique strengths: Noble with its strategic acquisitions and steady yield, Baker Hughes with its technological innovations and solid growth, and ONEOK with its reliable, fee-based revenue and infrastructure expansion. These energy stocks present a balanced mix of value and yield potential, making them worthy considerations for any income-focused portfolio.