3 Energy ETFs With Relatively Safe Dividends

3 Energy ETFs With Relatively Safe Dividends

The United States Oil Fund USO is down almost 62% this year. Oil is so volatile that in the span of a few days earlier this month, it notched its worst one-day decline in three decades and its best-ever intra-day gain.

The commodity is struggling as Saudi Arabia and Russia flood the market with unneeded supply, forcing prices lower and forcing the energy sector into a familiar spot as the worst-performing group in the S&P 500.

And with Occidental Petroleum's OXY recent 86% dividend cut, investors are becoming increasingly concerned about the ability of some oil companies to continue delivering dividends. That's a relevant consideration with the S&P 500 Energy Index yielding an astounding 9.67%.

However, some analysts believe integrated oil companies can maintain payouts, perhaps even off modest growth, if other cost-cutting measures are implemented. With that in mind, here are a few energy ETFs that aren't heavily allocated to likely dividend cutters.

Energy Select Sector SPDR (XLE)

The Energy Select Sector SPDR XLE allocates almost 49% of its weight to Dow components Exxon Mobil XOM and Chevron CVX. The former saw its credit rating downgraded by S&P last week and on Monday, the ratings agency lowered its outlook on Chevron to “negative.”

Both companies have lengthy dividend increase streaks going and are likely to be loathe to cut those payouts. Some analysts seem to agree that integrated oil dividends are fairly safe at the moment.

“The spike in dividend yields to all-time highs suggests the market believes a dividend cut for many companies is likely,” said Morningstar in a recent note. “We disagree and think dividends are largely safe, thanks to an ability to increase debt in the near term. Furthermore, companies are likely to slow or stop dividend growth, reduce capital expenditures, sell assets, and if necessary, restore the scrip option to save cash.”

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