4 Blue Chip High-Dividend Energy Stocks on Sale After Market Sell-Off

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Chevron

This stock is very solid story for investors looking to stay long the energy sector. Chevron Corp. (NYSE: CVX) sports a sizable dividend and has a solid place in the sector when it comes to natural gas and liquefied natural gas (LNG). Some Wall Street analysts estimate Chevron will have a compound annual growth rate of over 5% for the next five years, and the stock trades at a modest valuation discount to some of its mega-cap peers.

Chevron management is aggressively pursuing cost-saving initiatives and has already completed over 2,200 supplier engagements, with more in progress. Cost savings and improving investor sentiment may be a key for the mega-cap integrated as it has struggled mightily over the past year. While many on Wall Street concede that the oil market could be oversupplied for longer than most thought, massive overseas demand and a production slowdown should help pricing the rest of the year and into 2016.

Chevron is focused on current major projects, and probably not in the market for a major deal at this time, so cash levels and debt on the books should stay consistent.

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Chevron investors are paid a massive 5.47% dividend. The Merrill Lynch price target on the Neutral-rated stock is $100. The consensus target is $93.65 Shares closed trading on Thursday at $78.34.

Occidental Petroleum

Occidental Petroleum Corp. (NYSE: OXY) announced last year it will continue to grow dividends and expects to begin buying back more shares this year and beyond, a double plus for shareholders. Analysts feel that the company still faces the rebounding oil price correction with the strongest balance sheet in the sector, with net cash at year end 2014 estimated at around $1.7 billion, and a whopping $11 per share of cash available for buy backs. With chemicals and other products helping to blunt the drop in oil, Occidental is well positioned to continue to ride out the storm.

This is also another company taking advantage of huge cost savings. In fact, capital expenditures are expected to fall from $1.7 billion to $1.0 billion by the end of the year. The company announced recently a deal with Ecopetrol to invest up to $2 billion over the next decade to increase production at the La Cira-Infantas oil field in Colombia. According to Reuters, the new round of investments will increase production in the region by more than 200 million barrels.

Occidental shareholders are paid an outstanding 4.57% dividend. The Merrill Lynch price target is $95, and the consensus target is $78.19. The stock ended Thursday at $65.97.

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While energy is still a contrarian trade, the way to play it is with the big integrated stocks and exploration and production companies that pay a solid dividend. Even if the wait time is 12 to 18 months, the payout could be significant, and investors are paid nicely to wait.