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Fossil fuels like oil will continue to play a key role in meeting the global energy demand. At the same time, the world is now focusing on clean energy, thereby gradually brightening the outlook for renewables. Hence, it seems prudent to look into investing in those high dividend yield paying energy companies allocating money for renewable operations while maintaining a strong footprint in upstream operations.

Massive Crude Recovery

The price of West Texas Intermediate crude has been recently trading above the $70-per-barrel mark, highlighting a substantial improvement from the negative territory hit last April. Brent crude price, trading above $75-per-barrel mark, has also skyrocketed from the pandemic-hit low mark last year.

The rapid and widespread rollout of coronavirus vaccines has driven the massive crude recovery. The positive trajectory in oil price is definitely a boon for energy players' exploration and production activities. With improving commodity prices, drilling activities worldwide have been increasing at a healthy pace.

Energy Transition

Increasing drilling activities on the back of crude price recovery is definitely good news for upstream businesses. But energy investors should also consider the factor of energy transitions. Energy companies worldwide are getting constant pressure from investors and governments to reduce greenhouse gas emissions and align their goals with the Paris climate agreement.

Hence, companies with upstream business dominance and a strong renewable focus are the best to bet on. This is because those firms are benefiting from the rising oil price and are also leading energy transitions to capitalize on mounting clean energy demand.

Lucrative Dividend Yield

So, it has been pretty clear that energy companies in oil and renewable businesses are now in the spotlight since their long-term outlook seems extremely bright. At the same time, it would be nicer if those companies also had a strong focus on returning capital to shareholders.

With the help of our proprietary stock screener, we have zeroed down on three energy companies paying dividend yield significantly higher than the broader Zacks Oil - Energy sector as well as the Zacks S&P 500 composite. All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

3 Stocks in The Spotlight

An improving oil price scenario and increasing daily oil equivalent production volumes are aiding BP plc’s (BP - Free Report) bottom line. BP added that the target of adding a net production of 900 thousand barrels of oil equivalent per day by 2021 from key new upstream projects has already been delivered successfully.

BP is also leading energy transition and has set an ambitious goal of becoming a company with net-zero emissions by 2050 or earlier.

BP is strongly focused on returning capital to shareholders. The integrated player recently announced that it intends to execute an additional $1.25 billion of share repurchases before declaring results for the December quarter. BP continues to anticipate that it will buy back $1 billion shares every quarter, considering the Brent crude price at $60 per barrel.

On the dividend front, BP projects a hike in annual dividend per ordinary share of 4% through 2025. Also, BP’s dividend yield of 4.7% is higher than the 3.9% yield of Zacks Oil - Energy sector and the 1.2% yield of the Zacks S&P 500 composite.

Eni SpA (E - Free Report) has a global presence in the energy business with a strong upstream presence. In the Ivory Coast, the energy major made big oil and gas discoveries. Eni has also set an ambitious goal to decarbonize its products and processes fully.

In its overall operations, Eni increasingly involves green energies. To accelerate the energy transition and promote renewable energy, Eni entered into a three-year partnership deal with International Renewable Energy Agency (IRENA) on Sept. 30.

Looking at dividend history, it has been a clear picture than Eni’s dividend yield of 5.1% is more attractive as compared to the Zacks Oil - Energy sector and Zacks S&P 500 composite.

TotalEnergies SE (TTE - Free Report) is not abandoning its traditional oil business to emphasize on energy transitions. TotalEnergies now has an ambitious plan of reducing the net carbon footprint of its operations to zero by 2050 or sooner.

Looking at dividend history, TotalEnergies’ dividend yield of 4.5% is compelling. Considering TotalEnergies’ five-year median dividend yield of 4.6%, investors are still getting rewarded handsomely. Thus, shareholders of TTE are not only getting rewarded, but are also playing a role in the energy transition.