Choosing Between Two High-Yield Energy Stock Picks: A Comparison Guide

The Case for Including Energy Stocks in Your Portfolio

Oil and natural gas aren’t just commodities traded on exchanges—they’re embedded in nearly every aspect of modern life. From fueling transportation to powering utilities and manufacturing consumer goods, these energy sources remain indispensable. While renewable energy is growing, petroleum and natural gas will likely remain critical infrastructure for decades. This makes energy sector exposure a strategic consideration for dividend-focused investors, despite the industry’s notorious price swings.

If you’re evaluating where to deploy capital in energy infrastructure, two prominent shares stand out: Chevron Corporation(NYSE: CVX) and Enterprise Products Partners(NYSE: EPD). Both offer compelling distributions to shareholders, yet they serve different investor profiles and risk tolerances.

Enterprise Products Partners: The Toll-Taker Approach

Enterprise Products Partners operates as a master limited partnership (MLP) and has consistently increased distributions for 27 consecutive years—matching the entire span of its public trading history. Here’s the strategic advantage: rather than betting on commodity price movements, Enterprise collects fees for infrastructure access.

The company owns and operates pipelines, storage facilities, and logistics networks that move oil and natural gas across North America. This midstream positioning creates a crucial distinction—whether crude prices surge or plummet, Enterprise generates cash from the volume flowing through its systems, not the per-barrel price. The business model resembles a toll operator more than a commodity trader.

The numbers reflect this stability. Enterprise distributes a 6.8% yield to shareholders, significantly above the energy sector average. More importantly, the company’s distributable cash flow covers its distribution 1.7 times over, meaning it has substantial cushion before any reduction would occur. The balance sheet carries investment-grade ratings, providing additional flexibility during industry downturns.

However, MLP investors must navigate tax complexity. These structures generate K-1 forms instead of standard 1099s, creating additional April accounting burdens. Master limited partnerships also function poorly inside tax-advantaged retirement accounts like IRAs, limiting their utility for some investors.

For shareholders prioritizing steady, growing distributions over price appreciation, Enterprise represents the more defensive play.

Chevron: Integrated Exposure to the Full Energy Cycle

Chevron takes a different structural approach as an integrated energy company spanning upstream production, midstream transportation, and downstream refining plus chemicals. This diversification across the entire energy value chain creates a natural hedge against commodity volatility. When oil prices collapse, the refining segment sometimes benefits from lower input costs. When prices spike, production becomes highly profitable.

The company’s financial fortress reinforces this stability. A debt-to-equity ratio around 0.22 ranks among the lowest in the energy sector, providing substantial borrowing capacity during industry troughs. This financial flexibility has enabled Chevron to maintain 38 consecutive years of annual dividend increases—a remarkable achievement given the industry’s cyclicality.

Currently, Chevron offers a 4.5% dividend yield, positioning it above the energy sector median of 3.2% and substantially ahead of the S&P 500’s 1.1% payout. Investors receive both income and the prospect of growing distributions across economic cycles.

The tradeoff: Chevron shares experience commodity price swings more directly than Enterprise, making the stock more volatile year-to-year. Shareholders must tolerate these fluctuations to access the integrated energy company structure and higher distribution growth potential.

Comparing the Two Companies: Which Fits Your Strategy?

Making Your Decision: Risk Tolerance Determines Fit

For conservative investors seeking maximum stability and planning to hold shares in tax-sheltered accounts, Enterprise Products Partners edges ahead despite its tax complications outside retirement vehicles. The midstream business model delivers more predictable cash flows and distributions backed by 1.7x coverage.

Investors comfortable with greater volatility—and those seeking higher distribution growth trajectories over extended holding periods—may find Chevron more suitable. The company’s three-decade track record of rising dividends and stronger balance sheet create optionality during energy market stress.

The broader principle: energy sector representation belongs in most diversified portfolios. Whether you select Chevron’s integrated exposure or Enterprise’s infrastructure toll model depends on whether you prioritize yield stability or long-term distribution growth potential.