2 of the Best Oil Stocks to Buy Now and Hold for Decades

The geopolitical conflict in the Middle East is making huge headlines, and so is the resulting rise in oil and natural gas prices. Investors looking at the energy sector today need to consider more than the current upswing in energy prices if they want to buy an energy stock and hold it for the long term. Which is why ExxonMobil (XOM +2.54%) and Chevron (CVX +0.77%) should be top picks for those with a multi-decade investment time frame.

Exxon and Chevron are built to survive

The core business of Exxon and Chevron is producing oil and natural gas, which is known as the upstream. The upstream is almost entirely driven by energy prices, which means right now, upstream businesses are benefiting from the rise in oil and gas prices. However, that isn’t where Exxon and Chevron stop.

Image source: Getty Images.

These two energy giants also transport energy (the midstream) and process it in their chemical and refining plants (the downstream). Midstream operations, which charge fees for transporting energy, tend to provide fairly reliable income regardless of oil prices. Downstream businesses often benefit from low energy prices, since oil and natural gas are key inputs.

Having exposure to the entire energy value chain limits the upside Exxon and Chevron will see from rising oil prices. However, it also limits the downside when oil prices fall. History shows that oil prices are inherently volatile, rising and falling in dramatic and sometimes rapid fashion. If you buy today, when oil prices are high, you need to be prepared for the time when they are low if you intend to be a buy-and-hold energy investor.

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NYSE: XOM

ExxonMobil

Today’s Change

(2.54%) $4.09

Current Price

$165.22

Key Data Points

Market Cap

$671B

Day’s Range

$161.75 - $167.47

52wk Range

$97.80 - $167.48

Volume

1.3M

Avg Vol

21M

Gross Margin

21.56%

Dividend Yield

2.51%

Exxon and Chevron are rewarding dividend investors well

Not only do Exxon and Chevron have businesses built to handle the energy industry’s normal swings, but they also have strong balance sheets. Their low debt-to-equity ratios of roughly 0.2x and 0.25x, respectively, give them the leeway to add debt during industry downturns, enabling them to continue supporting their businesses and dividends until oil prices recover.

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NYSE: CVX

Chevron

Today’s Change

(0.77%) $1.58

Current Price

$206.79

Key Data Points

Market Cap

$409B

Day’s Range

$205.81 - $209.79

52wk Range

$132.04 - $209.79

Volume

446K

Avg Vol

12M

Gross Margin

14.66%

Dividend Yield

3.37%

Which brings up the dividends. Exxon’s yield is 2.5%, and Chevron’s is 3.5%. Both have increased their dividends annually for more than a quarter of a century. If you are a dividend investor, these two diversified industry giants will likely fit well in your portfolio.

Energy is vital to the world, and most investors should have some exposure to the sector. If you are thinking about adding that exposure today, as oil prices are on the rise, you should think about what happens when prices eventually fall. Exxon and Chevron are built to survive that price decline while continuing to reward you with reliable dividends.