Energy stocks can be highly volatile. Prices for many companies move in correlation to oil prices. When oil prices spike, so do the stock prices for many companies. Unfortunately, many energy stocks struggle to keep up with benchmark returns when oil prices fall.
However, given the significant emphasis on renewable energy, analysts believe 2025 could be a strong year for many energy stocks. As the United States focuses on building the infrastructure to scale renewable energy, many companies could benefit from revenue growth and higher stock prices.
Reach your investing goals
Join more than 30,000 people tracking their investment portfolios with Ziggma.
What Are Energy Stocks?
The energy sector has a broad meaning. It includes companies that explore, produce, refine, transport, store, distribute, and sell various energy products.
When looking for the best energy stocks to buy, you will come across companies that are grouped into categories based on their focus. Most companies are either upstream, midstream, or downstream companies. Let’s look further into each.
- Upstream: These companies are heavily involved in exploration to find energy commodities and drilling to extract them.
- Midstream: Once the commodity has been extracted, midstream companies will transport and store the commodity.
- Downstream: Finally, downstream companies are involved in the marketing and sales of the commodity.
It’s common for companies to focus on a single industry. However, some larger corporations, like Chevron, are involved in multiple industries. They are involved in exploration, extraction, marketing, and sales.
Pro Tip: As you add energy stocks to your portfolio, use Ziggma’s portfolio tracker. This will provide valuable insights to ensure your portfolio can outperform the broad market.
Best Energy Stocks to Buy in January 2025
Here’s a look at the five best energy stocks to buy in 2025.
HF Sinclair Corp. (DINO)
When looking for energy companies, HF Sinclair Corp. is a favorite. This independent energy company produces and markets gasoline, diesel fuel, jet fuel, lubricants, renewable diesel, and more.
Even though the stock price has had a rough go over the previous eight months, analysts believe there is a 39% upside from its current levels. This is mainly due to its low debt levels compared to its peers and acquisitions, further diversifying its revenue streams. This could be a great time to buy the dip.
Investors should also love the 5.34% dividend yield, making it one of the best dividend stocks available.
Kinder Morgan (KMI)
Kinder Morgan operates an extensive network of over 79,000 miles of pipelines, transporting natural gas, crude oil, gasoline, and carbon dioxide. Additionally, it owns 139 storage facilities that house everything from vegetable oil to renewable fuels.
The company’s storage terminals are currently near capacity, and that’s not expected to change much in 2025. With oil imports expected to fall, there will be even higher demand for transporting and storing domestic oil.
Even though Kinder Morgan’s stock price is up more than 48% year-to-date (YTD), this stock is worth considering for your portfolio. Plus, like DINO, its 4.26% dividend yield is extremely attractive.
Also Read: Best EV Stocks to Buy
EOG Resources (EOG)
With natural gas demand expected to grow significantly in 2025, EOG Resources is a name to know. They explore, develop, produce, and market crude oil, natural gas, and natural gas liquids. They have been investing heavily in projects to help support the expected increase in demand in the coming years.
EOG would be a smart addition to your portfolio because of its profitability. With an expected 2024 net profit margin of 27.30% and an effective asset utilization of 17.82%, EOG is one of the world’s most profitable natural gas companies. Plus, with strong cash flows, EOG has been able to complement dividends with aggressive share buybacks, providing extra shareholder value.
With a current stock price hovering around $125, analysts believe a 15% upside exists.
Chevron (CVX)
Chevron, a more traditional oil and gas company, is another energy stock to consider. Although oil demand is expected to fall, Chevron recently reported third-quarter results that topped analyst expectations.
They reported revenue of $50.67 billion, compared to an expected $48.99 billion. Their earnings per share (EPS) were $2.51, compared to an expected $2.43. Even though profits were down, the company continued to reduce its costs while increasing production. Its third-quarter production numbers were the third highest in company history.
Investors should also like that the company completed $4.7 billion in stock buybacks and issued $2.9 billion in dividends.
Also Read: Best Renewable Energy Stocks
Energy Transfer LP (ET)
Energy Transfer is a midstream energy company expected to generate approximately $15.3 billion in adjusted revenue in 2024, up approximately 13% from 2023. Recent acquisitions, including Lotus Midstream, WTG Midstream, and Crestwood Equity Partners, have contributed to significant growth.
Beyond its acquisitions, it is in the final stages of other projects that should help boost revenues. These include a 30-mile pipeline transporting additional oil from the Permian Basin to a regional storage center. In addition, it completed the expansion of the Orla East processing plant in the Permian Basin.
Although its stock price is up more than 35% YTD, analysts think there is still an 8% upside. The company also currently has a dividend yield of 6.70%.
Methodology for Picking the Best Energy Stocks
We looked at several factors when choosing companies to include in our list of the best energy stocks. These companies must have a vision of future growth potential. We also wanted to see strong balance sheets.
Many of these companies have a significant amount of free cash flow that they’re using to acquire new revenue operations and for share buybacks and dividend payments.
Finally, these companies also have a high a Ziggma Score.
The Bottom Line
Even though the energy sector tends to be volatile, these stocks are a great way to diversify your investment portfolio and add dividend-paying stocks for additional income.