Energy Stocks Replace REITs And Utilities As The New Dividend Kings

Dividend investors long relied on the stability and income growth of traditional sectors like utilities and Real Estate Investment Trusts (REITs). However, energy stocks are starting to screen as top dividend picks while utilities and REITs have cut dividends. Not only have energy companies already raised dividends, but their recent debt reduction programs have freed up more cash flow for future dividend growth.

When screening for dividend stocks, investors typically seek companies that exhibit earnings growth, low debt-to-equity ratios, a consistent track record of dividend increases, and reasonable payouts. With a steady climb in dividends post-COVID, and improving payouts through better pricing, declining debt levels, and even buybacks, energy names check all these boxes. This is taking place at a time when REITs and utilities have cut dividends, and some have payouts that suggest dividends can’t be raised again for years. This eliminates those historical stocks as options under many dividend strategies.