Currently, the markets are experiencing a bullish trend. However, the conventional wisdom says that we’re looking at a recession, likely short and shallow, to play out during the second half of this year, with a chance of extending into 1Q24.
Looking at the situation from RBC Capital, Lori Calvasina writes, “There are two ways it can go from here: Something could go wrong with those winning companies and pull the market down, or the market’s leadership could broaden out. One of those paths isn’t automatically more likely than the other… We recommend a balance: some defensive stocks, some value, and some growth… [We] also like energy stocks. Energy has a high dividend yield relative to other sectors and versus its history, and energy companies have been active in buying back stock.”
RBC’s 5-star analyst Scott Hanold is following Calvasina’s lead, recommending two high-yielding energy dividend stocks, including one that yields around 8%. These strong dividend payers offer the protection of a steady income stream even through a downturn. Let’s take a closer look.
Chesapeake Energy (CHK)
We’ll start with Chesapeake Energy, an oil and gas production firm founded in 1989 and operating today in three high-output shale formations: the Eagle Ford of south Texas, the Haynesville of northwestern Louisiana, and the Marcellus shale of northeastern Pennsylvania. The company specializes in horizontal drilling and hydraulic fracturing, while implementing proven environmental protective measures to protect aquifers and other natural resources.
The Marcellus holding is Chesapeake’s largest, at approximately 465,000 net acres and production of 1.97 billion cubic feet equivalent per day. In the Haynesville formation, the company holds 370,000 net acres and produces 1.55 bcfe/d. The Eagle Ford assets are Chesapeake’s smallest, after the company sold off $2.8 billion worth of land holdings in the first quarter of this year. Chesapeake retains about 50,000 net acres focused in the ‘Rich Gas’ portion of this Texas play.
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