The S&P 500 has faced a downturn since peaking on February 19, 2025, despite gaining 1.2% in the first two months of the year. A key driver behind this decline has been the falling price of crude oil, with West Texas Intermediate crude down 14.3% over the past year. While this has put pressure on energy stocks, long-term investors have a valuable chance to acquire high-quality dividend stocks at lower valuations. Three notable S&P 500 energy companies—Occidental Petroleum, ConocoPhillips, and Devon Energy—stand out as strong candidates for investors looking to capitalize on this market shift.
Occidental Petroleum: Strengthening Its Position
Occidental Petroleum (OXY) has seen its stock decline by 22.7%, despite reporting record U.S. oil production in 2024. The company’s assets in key regions such as the Delaware, DJ, Midland, and Powder River basins contributed to its success, and its recent acquisition of CrownRock has further expanded its footprint in the Midland Basin.
The company has also taken significant steps to strengthen its balance sheet, repaying $4.5 billion in near-term debt ahead of schedule. These strategic moves have positioned Occidental Petroleum to navigate the downturn in energy prices more effectively, ensuring it remains financially stable. Additionally, its inclusion as a major holding in Berkshire Hathaway’s portfolio highlights its long-term investment appeal.
ConocoPhillips: Strong Reserves and Smart Acquisitions
ConocoPhillips (COP) has declined by 19.2%, but the company remains a compelling investment due to its strong fundamentals and disciplined financial strategy. The company’s valuation, at 5.2 times operating cash flow, is lower than its five-year average of 6.2 times, making it an attractive buy.
The completion of its $22.5 billion acquisition of Marathon Oil in late 2024 added over 2 billion barrels of low-cost resources to its portfolio. This deal also introduced more than $1 billion in cost synergies, expected to be realized in 2025. Additionally, ConocoPhillips has grown its reserves significantly, ending 2024 with 7.8 billion barrels of oil equivalent (BOE), a notable increase from 6.8 billion BOE the previous year.
The company maintains a disciplined cash flow strategy, consistently generating free cash flow that exceeds its dividend payouts. In 2024, it returned 45% of operating cash flow to shareholders while ensuring that financial stability remains a priority.
Devon Energy: Growth and Shareholder Returns
Devon Energy (DVN) has experienced the sharpest decline among the three stocks, with a 23.2% drop over the past year. However, its operational performance remains strong. The company set a record for oil production in the fourth quarter of 2024, reaching 398,000 barrels per day, largely driven by its acquisition of Grayson Mill. Overall, its production hit 737,000 BOE per day in 2024 and is projected to increase to between 805,000 and 825,000 BOE per day in 2025.
Devon Energy generated $3 billion in free cash flow in 2024, enabling it to enhance its financial stability and distribute earnings to investors. It distributed $2 billion to investors while repaying $472 million in debt. Unlike traditional dividend models, Devon operates a variable dividend structure, combining a fixed base payout with additional variable amounts linked to financial performance. Recently, the company has prioritized share buybacks over increasing its variable dividend, reflecting a strategic approach to long-term capital allocation.
A Timely Opportunity in Energy Stocks
The decline in oil prices has caused energy stocks to drop, presenting a chance for long-term investors to acquire strong dividend-paying companies at more attractive valuations. Occidental Petroleum and ConocoPhillips stand out as reliable choices for those seeking steady income from established firms, while Devon Energy provides a high-growth opportunity with significant production expansion. Given the cyclical nature of energy markets, these three companies are well-positioned to generate value in the coming years.