The top 5 US oil and gas dividend stocks for 2023

Jason Trennert, chairman and CEO of Baird-owned Strategas Research Partners, has advised investors to take a defensive approach in 2023 due to the high likelihood of a recession. In addition to delivering consistent earnings, many dividend-paying stocks are in defensive sectors that can weather economic downturns with reduced volatility. Companies that pay large dividends typically have significant amounts of cash and good prospects for long-term performance.

With impressive sales and earnings growth, many leading energy companies are returning more capital to shareholders in the form of dividends and share repurchases. Companies usually buy back shares when they think they are undervalued, an added bonus for oil and gas bulls. The energy sector is expected to enjoy another year of great earnings, so it remains a good bet heading into 2023.

If you’re looking for solid energy dividends, here are the top aristocrats and payout leaders.

VOC Energy Fund

Industry: Royalty Trust

Market Cap: $139.2 million

Dividend Yield (FWD): 17.83%

Houston, Texas based VOC Energy Fund (NYSE: VOC) is a royalty trust that acquires and holds a net profit interest over time from the net proceeds from the production and sale of its interests in oil and natural gas properties in the states of Kansas and Texas.

Like Master Limited Partnerships (MLPs), royalty trusts are typically high-dividend, tax-advantaged energy investments that are required to pay out a certain portion of their proceeds to investors.

VOC has a net profit interest of 80% on the net proceeds of the underlying properties. As of December 31, 2021, the underlying properties had interests in 452.5 net producing wells and 51,147.2 net hectares. As of December 31, 2021, the company had proven reserves of approximately 2.9 million barrels of oil equivalent (MMBoe) attributable to the portion of the underlying properties in Kansas; and approximately 5.4 MMBoe attributable to the underlying properties in Texas.

Dorchester Minerals, LP

Industry: Master Limited Partnership (MLP)

Market Capitalization: $1.0 billion

Dividend Yield (FWD): 16.13%

Dorchester Minerals, LP (NASDAQ: DMLP) is a master limited partnership engaged in the acquisition, ownership and administration of producing and non-producing natural gas and crude oil, royalties, net income and leasehold interests in the United States. In October, Dorchester Minerals declares a quarterly dividend of $1.135/share, representing a healthy 17.1% increase over its previous dividend of $0.969. The shares now yield a juicy dividend of 16.13%.

For decades, master limited partnerships, or MLPs, have been a source of reliable, high-yield income for energy investors. An MLP is required by law to derive at least 90% of its cash flow from commodities, natural resources or real estate. They, in turn, return cash to shareholders instead of paying dividends as a standard company would. MLPs combine the liquidity of public companies and the tax advantages of private partnerships because profits are only taxed when investors receive distributions.

The biggest appeal of MLPs is that they are considered pass-through entities under US federal tax law. While most corporate income is taxed twice (first through earnings and again through dividends), the pass-through status of MLPs allows them to avoid this double taxation because income is not taxed at the corporate level. Another key benefit: Midstream MLPs act as toll collectors for the energy companies that use their pipelines. As such, their cash flows are protected by long-term take-or-pay agreements, meaning they are less susceptible to commodity price fluctuations.

Black stone minerals

Industry: Master Limited Partnership (MLP)

Market Capitalization: $3.6 billion

Dividend Yield (FWD): 10.51%

Black Stone Minerals, LP (NYSE: BSM) is an MLP that owns and manages interests in oil and natural gas minerals. It owns mineral interests in approximately 16.8 million gross acres, nonparticipating royalty interests in 1.8 million gross acres, and controlling royalty interests in 1.7 million gross acres in 41 states in the United States.

Black Stone Minerals, LP reported record third quarter results, largely due to increased production on its acreage. In fact, the company’s distributable cash flow and benefits will increase in 2023 as low-priced hedges roll away. BSM is one of the better performing MLPs with shares up 60.2% YTD.


Industry: Master Limited Partnership (MLP)

Market Capitalization: $32.22 Billion

Dividend Yield (FWD): 9.65%

MPLX LP (NYSE: MPLX) owns and operates midstream energy infrastructure and logistics assets primarily in the United States. In November, the company announced a quarterly dividend of $0.775/share, representing a 10% increase over the previous dividend of $0.705. The shares are now yielding 9.65%.

MPLX, one of the largest MLPs, has strong operating fundamentals and a high-quality asset base, meaning its dividend is largely safe. The company also maintains a strong balance sheet and very solid distribution coverage.

Magellan Midstream Partners, L.P

Industry: Master Limited Partnership (MLP)

Market Capitalization: $10.4 billion

Dividend Yield (FWD): 8.29%

Magellan Midstream Partners, L.P (NYSE: MMP) is engaged in the transportation, storage and distribution of refined petroleum products and crude oil in the United States. Not only does MMP have a mature asset base that does not require large amounts of capital to maintain, but the company is also returning decent amounts of cash to shareholders through both distributions and buybacks. The company has generated $1.1 billion in total distributable cash flow this year.

Other highest paying MLPs are:

Enterprise Products Partners LP (NYSE: EPD)–7.86% direct yield

Plains All American Pipeline, LP (NASDAQ: PAA)–7.44% Fwd Yield

Kinder Morgan Inc. (NYSE: RMI)–6.18% direct yield

By Alex Kimani for

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