I experienced the Albuquerque International Ballon Fiesta on Sunday night and Monday morning. Oh sorry, excuse me, the Exxon Mobile Albuquerque International Balloon Fiesta. The oil and gas giant is now the event’s title sponsor from 2025 through 2029.

I had a great time at the event, and found myself reading some recent headlines related to Exxon Mobil Corp. (XOM). It was the right day to check the news.

Source: Upstream Online

A barrel of West Texas Intermediate (WTI) crude is now around $62. This is down from $79 in January and about 7% year over year. That might not seem like a lot, but it matters when talking about the massive quantities of oil moved by giant oil companies.

As consumers, we want to see lower crude prices trickle through to the gas pump. What we don’t want to see is shrinking margins for our investments. In July, XOM said its earnings could fall by $1 billion due to oil price fluctuations. It has since scaled back that pessimism with a forecast that includes a possible gain.

That is good news for current shareholders, but I’ll be honest. I don’t have XOM on my watchlist because its dividend is too low. The company pays $0.99 per quarter for a current yield of 3.4%. Not only is that below my minimum yield, it’s below some of its industry peers.

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Higher Yield Options

We’re about to see a lot of data hit the market for earnings season. This is the week to make sure your watchlist is ready. Then, if the earnings calls presentations from management teams aligns with your analysis, you can act quickly. If you don’t have oil exposure in your portfolio, here are two I would be watching.

Chevron Corp. (CVX) currently yields 4.4%. In July, CVX acquired competitor Hess Corporation, yet shares are up just 1.9% from last year. I would have expected shares to price in optimism, but it’s just not there. That will change once the acquisition translates into numbers.

The company will host its next earnings call on October 31. We can expect to hear an update about the integration of the two companies. It will be less than a full quarter since the acquisition, but we should get enough information to know if now is a good time to pull the trigger on CVX.

BP plc (BP) is another household name oil giant and yields 5.7%. The company just appointed Albert Manifold as chairman on October 1. He wasted no time announcing a plan to sell more assets, cut costs, and streamline the company’s portfolio.

A strategic goal with a clear plan can be a great time to invest in a company. Success usually means a higher share price is waiting on the other side. During the company’s next call, analysts will be listening for clues hidden between the lines on this plan, and I think we should, too.

But these oil giants aren’t the only way to add oil income to your portfolio.

I Prefer the Role of Toll Collector

Many of you know I prefer to hold shares of pipeline companies instead of the oil companies themselves. They are generally structured as master limited partnerships (MLPs) and required to pass through 90% of profits to unitholders resulting in higher yields.

Instead of being dependent on the price of oil, pipeline companies have long-term, volume-based contracts as it moves oil from drilling fields to refineries to ports. This business also has a very high cost of entry, so new competition will not likely pop up overnight.

I want to own the toll road that oil travels through. I don’t want to be at the mercy of the oil price or the actions of political leaders on a given day.

XOM operates its own in-house pipeline, but my favorite is Enterprise Products Partners (EPD). I was asked recently when it might be time to sell shares of EPD. I responded that for me personally it wouldn’t be anytime soon. It’s the largest position in my portfolio and I plan to pass my shares to my nephews many years from now.

EPD is also an MLP, so you don’t want to hold it in your tax-advantaged account. Owning shares of EPD makes you a part owner, not an investor. This can generate unrelated business taxable income (UBTI), which you will have to pay taxes on.

If you’re going to use a tax-advantaged account for MLP oil exposure, I would instead look at the Global X MLP & Energy Infrastructure ETF (MLPX). This fund holds a variety of these investments and pays a current yield of 4.5%. This is lower than EPD’s current 6% yield, but it lets you avoid the tricky tax situation.

All that said, now is the time to have high-quality oil dividend stocks in your portfolio, whether it’s an oil giant or a pipeline company. Use the data flux we’ll see during earnings season to scope out the one that’s right for you.

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For more income, now and in the future,

Kelly Green

P.S. If you like podcasts, I sat down last week and talked with my friend Russ at Dapper Dividends. He asked me to " roast his portfolio." It's available on his You Tube channel.

• BP
• Chevron
• Enterprise Products Partners
• Exxon Mobile
• Global X MLP & Energy Infrastructure ETF
• MLPs
• pipeline companies