The energy market is currently difficult to read, but finding energy stocks to sell is not challenging. On the one hand, investment banks are signaling that oil prices will increase for the remainder of 2023. Yet, on the other hand, the International Energy Agency recently adjusted its global oil demand forecast downward on macroeconomic headwinds.
Despite those mixed signals, it remains fairly easy to identify firms that are already suffering. Several firms are doing significantly worse than they were a year ago. The decline in oil revenues has been sharp, and many firms have fared much worse. Let’s discuss a few of those firms and a non-oil stock that is a clear sell.
Shell (NYSE:SHEL) stock isn’t as credible as it once was. One of the hallmarks of big oil is dependable dividends. Investors rely on dividend income to smooth the volatility inherent to the sector as oil prices shift and affect earnings.
So, when a firm of Shell’s size reduces its dividend, it quickly joins the list of energy stocks to sell. Shell did precisely that in 2022. Further, Shell’s dividend growth rate over the prevailing five years sits at -16%. That rightly makes investors hesitant and will continue to plague the firm.
Investors are likely on alert because Shell’s earnings fell to $5 billion in Q2. It was well below the $11.5 billion in earnings a year earlier and worse than the $5.8 billion Wall Street was expecting. Shell increased its dividend by 15% in Q2. That likely alleviates some of the fear around its shares. However, almost everything is headed in the wrong direction for the firm. Lower oil prices and LNG prices are hurting the firm.
Devon Energy (DVN)
Devon Energy (NYSE:DVN) proves that 2023 is much more difficult for oil stocks than 2022. Devon Energy’s problems are almost all attributable to dwindling dividends. It’s as simple as that. Like Shell and other energy firms, declining dividends mean declining income for investors. And if you pay investors less, they become much more likely to flee.
That’s precisely what’s happening to Devon Energy — investors are bailing out as the company has drastically reduced its dividend over the last year. Peak oil prices were a bonanza for energy firms in 2022. However, peaks are followed by declines. Devon Energy paid a $1.55 dividend a year ago. It has reduced it during the four subsequent quarters.
Investors will receive a $0.49 dividend this quarter. A year earlier, that dividend paid $1.35. That trajectory makes it increasingly difficult for DVN shares to move upward anytime soon and makes it one of the best energy stocks to sell.
Nikola (NASDAQ:NKLA) is a different type of energy stock but one to jettison nonetheless. I’m not referring to Nikola as an energy stock because it develops EV trucks. Rather, I’m referring to Nikola’s foray into hydrogen. The company has invested in building hydrogen infrastructure as it pivots from its past issues.
That said, Nikola remains an EV truck firm first and foremost. It manufactured 33 trucks in Q2 and shipped 45. That equated to a modest $15.36 million in sales, including non-truck revenues. There’s been some progress, if slow. It’s just that Nikola is losing so much money that there’s no way to justify doing anything but steering clear altogether.
Nikola tallied $26 million in sales during the first half of 2023. Those sales led to a loss of nearly $387 million. Kudos to Nikola for continuing on after the Trevor Milton fiasco, but it still isn’t worth investing in the company.
The amount of money Nikola losses relative to its revenues is an astonishingly high ratio. It’s difficult to imagine that Nikola will continue to operate for much longer at this rate. Thus, that’s why I think it is one of the top energy stocks to sell.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.