3 cash-yielding energy stocks to watch | The Motley Fool UK – Motley Fool UK

Rising prices in the UK and around the world mean energy stocks could provide strong returns, according to Jacob Ambrose Willson.
Image source: Getty Images
Why should I invest in energy stocks now? Well, if you’ve been living under a rock for the past seven months or so, I have some news for you: energy prices are high. And they are about to get higher.
After removing an energy price cap in April, the UK’s energy regulator Ofgem is increasing the price cap by a further 32% in October, meaning consumers can expect bills to be up by 65% on average.
So, what’s behind these sky-high prices? A lot of it is down to supply-and-demand dynamics on the wholesale market. Rising global demand is being met with diminishing supply, particularly after the West’s embargo on Russian energy products as the war in Ukraine continues.
This high-price environment means that there’s a lot of cash sloshing about in the sector, which can be leveraged by smart investment. Here are three energy stocks that could yield strong returns.
This global energy heavyweight should be familiar with investors. Currently occupying third place in the FTSE 100 by market cap, BP (LSE:BP) still makes the majority of its earnings through fossil fuels. Therefore its share price is usually closely linked to oil and gas prices.
After piggybacking on the rising price of oil up until June, BP’s share price has retreated to 373p, which could provide an entry point for me to take advantage of the company’s dividend.
Thanks to a strong earnings performance over the last 12 months, BP has paid out more than $4bn in cash to shareholders, and its projected dividend payout for 2022 is 18.6p. However, this is only a forecast and could be downgraded should oil and gas prices continue on the downward trajectory of recent weeks.
British Gas owner Centrica is also benefitting from the high energy prices. The company’s stock is up 18% in the year to date, and it is on course to deliver revenue over $20bn and earnings of 7.28p this year, according to analysts.
This bodes well for the company’s prospects as an investment opportunity. Currently at 87p, Centrica stock looks decent value given its healthy financial outlook and the fact that Barclays analysts set a price target of 112p in April. 
Potential headwinds for Centrica in the coming months include commodity price volatility, wider economic uncertainty and supply chain disruption. The group expects these will offset underlying operational progress in the near term.
As soaring summer temperatures remind us of the dangers of climate change, renewable energy stocks will certainly come to the fore in discussions on energy investments.
Greencoat UK Wind is one such stock, which operates 43 onshore and offshore wind farms, with a combined generation capacity of more than 1.4 gigawatts. A revenue increase of 172.5% to 423.47mn and a 5% dividend last year demonstrates a strong basis for further growth.
However, the company’s upcoming profits could be impacted by a mooted windfall tax on all electricity generators in the UK. This kind of speculation has hit Greencoat’s share price in the recent past, although I still believe this is a solid future-facing investment.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.
Jacob Ambrose Willson has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays and Greencoat UK Wind. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
| Harshil Patel
UK shares can offer a lucrative path for passive income. Our writer considers a plan to double his State Pension.
Read more »
| Kevin Godbold
I reckon the best shares to buy now have strong growth in earnings and recent good news flow, such as…
Read more »
| Kevin Godbold
Here’s my three-step plan for achieving a growing income from dividend stocks and three companies I’d use to help execute…
Read more »
| Ben McPoland
Many British shares are trading cheaply and pay dividends. This is normally the hunting ground for Warren Buffett, yet he’s…
Read more »
| Stephen Wright
Finding the right opportunities can bring spectacular results. Here’s how our author has managed to increase his monthly passive income…
Read more »
| Christopher Ruane
Our writer is considering buying lithium shares for his Stocks and Shares ISA. Here, he outlines the decision process he…
Read more »
| Alan Oscroft
Are stock markets set for a rebound? If they are, there are plenty of penny shares around that might be…
Read more »
| Christopher Ruane
The Lloyds dividend has been growing strongly. But its history is more alarming. Christopher Ruane explains why he sold his…
Read more »
View All
Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.
To make the world Smarter, Happier, And Richer
Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show and premium investing services.
Read more about us >

We have taken reasonable steps to ensure that any information provided by The Motley Fool Ltd, is accurate at the time of publishing. Any opinions expressed are the opinions of the authors only. The content provided has not taken into account the particular circumstances of any specific individual or group of individuals and does not constitute personal advice or a personal recommendation. No content should be relied upon as constituting personal advice or a personal recommendation, when making your decisions. If you require any personal advice or recommendations, please speak to an independent qualified financial adviser. No liability is accepted by the author, The Motley Fool Ltd or Richdale Brokers and Financial Services Ltd for any loss or detriment experienced by any individual from any decision, whether consequent to, or in any way related to the content provided by The Motley Fool Ltd; the provision of which is an unregulated activity.
The value of stocks, shares and any dividend income may fall as well as rise and is not guaranteed, so you may get back less than you invested. You should not invest any money you cannot afford to lose, and you should not rely on any dividend income to meet your living expenses. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, administrative costs, withholding taxes and different accounting and reporting standards. They may have other tax implications, and may not provide the same, or any, regulatory protection. Exchange rate charges may adversely affect the value of shares in sterling terms, and you could lose money in sterling even if the stock price rises in the currency of origin. Any performance statistics that do not adjust for exchange rate changes are likely to result in an inaccurate portrayal of real returns for sterling-based investors.
Fool and The Motley Fool are trading names of The Motley Fool Ltd. The Motley Fool Ltd is an appointed representative of Richdale Brokers & Financial Services Ltd who are authorised and regulated by the Financial Conduct Authority (FRN: 422737). In this capacity we are permitted to act as a credit-broker, not a lender, for consumer credit products. We may also publish information, opinion and commentary about consumer credit products, loans, mortgages, insurance, savings and investment products and services, including those of our affiliate partners. We do not provide personal advice and we will not arrange any products on your behalf. Should you require personal advice, you should speak to an independent, qualified financial adviser.
The Motley Fool Ltd. Registered Office: 5 New Street Square, London EC4A 3TW. | Registered in England & Wales. Company No: 3736872. VAT Number: 188035783.
© 1998 – 2022 The Motley Fool. All rights reserved. The Motley Fool, Fool, and the Fool logo are registered trademarks of The Motley Fool Holdings Inc.


Leave a Comment