Energy stocks have seen a big jump: the Morningstar US Energy Index went up 22.59% in the last 12 months. This is more than the 15.33% rise of the Morningstar US Market Index.
Morningstar’s screen from February 10, 2026, points out six undervalued companies. These are Devon Energy, EOG Resources, Energy Transfer, Diamondback Energy, Cheniere Energy, and ONEOK.
Morningstar uses a few key metrics to rank these opportunities. They look at price-to-fair-value, Economic Moat Ratings, and Uncertainty Ratings. This helps find companies with lasting competitive advantages and those with short-term gains.
Other research also suggests companies with strong free cash flow and dividends. WarrenAI picked Matador Resources, Riley Exploration Permian, and Chord Energy for their growth possibilities. This shows how analysts use different factors to find the best oil stocks.
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Why Investors Are Watching Energy Stocks
Energy stocks move differently than tech or consumer ones. This can make your portfolio more stable over time.
Diversification and inflation hedge
Energy investments help protect against inflation. When oil and gas prices go up, so does the money coming in for producers.
Investors look for the right mix to balance risk and reward.
Income and dividend yields
Many energy companies pay out dividends or buy back shares. The yields vary by sector. Companies like Energy Transfer and Cheniere offer attractive yields.
It’s important to check if a company can keep paying dividends. Look at their cash flow and financial health. Don’t just focus on the yield.
Exposure to commodity cycles and oil price upside
Companies involved in exploration and midstream businesses are closely tied to oil and gas prices. When prices are good, these companies can offer big gains for long-term investors.
Things like politics, OPEC, sanctions, and climate policies can affect prices. These factors can change how much money you might make.
Top Oil and Gas Producers to Watch
Investors looking into oil and gas producers should consider cash generation, basin position, and capital allocation. The list below features producers with a clear focus on operations, targets for shareholder returns, and varying risk levels.
Devon Energy (DVN) focuses on low-cost shale in the Delaware and Bakken basins. Actions taken in 2018 have refocused assets and improved efficiency. Two-thirds of its production comes from the Delaware Basin, with a 17-year inventory life. Devon aims to return about 60% of free cash flow to shareholders by 2025. Morningstar rates uncertainty as high and the economic moat as narrow. The stock traded below Morningstar’s fair value on Feb. 10, 2026, with a forward dividend yield near 2.21%.
EOG Resources (EOG) focuses on disciplined capital allocation and field-level decision making. Its diverse assets across the Permian, Eagle Ford, Delaware, and emerging plays lower finding costs and support stronger initial production rates. EOG returns a significant portion of free cash flow through dividends and buybacks, using special dividends when needed. Morningstar assigns medium uncertainty and a narrow moat. The forward dividend yield is around 3.62%, making it a top choice for investors seeking cash returns and efficiency.
Diamondback Energy (FANG) mainly operates in the Permian Basin and has grown through acquisitions, including Energen and QEP. It has seen significant improvements in completion efficiency and lower drilling costs in Midland. The balance sheet supports returning nearly 50% of free cash flow to shareholders. Morningstar lists uncertainty as high with a narrow economic moat. The forward dividend yield is about 2.43%, often mentioned among top performing oil stocks focused on the Permian.
Additional value names highlighted by third-party screens show attractive cash metrics with higher execution risk. Matador Resources (MTDR) has projected upside with a mid-single-digit dividend yield and strong free cash flow yield. Riley Exploration Permian (REPX) has a very high free cash flow yield and elevated dividend yield. Chord Energy (CHRD) also shows strong cash conversion and shareholder distributions. These names can act like high growth energy stocks during upcycles but have significant company-specific risks.
| Company | Primary Basin/Assets | Morningstar Uncertainty | Forward Dividend Yield | Investor Focus |
|---|---|---|---|---|
| Devon Energy (DVN) | Delaware, Bakken, other premier basins | High | ~2.21% | Low breakeven costs, dividend policy, 60% FCF return target |
| EOG Resources (EOG) | Permian, Eagle Ford, Delaware, Powder River | Medium | ~3.62% | Disciplined allocation, high FCF returns, operational efficiency |
| Diamondback Energy (FANG) | Permian (Midland focus) | High | ~2.43% | Permian pure play, M&A history, efficiency gains |
| Matador Resources (MTDR) | Permian | Medium-High | ~3.2% | Value upside, strong FCF yield |
| Riley Exploration Permian (REPX) | Permian | High | ~5.8% | Very high FCF yield, higher execution risk |
| Chord Energy (CHRD) | Permian | High | ~5.2% | Strong cash generation, elevated yield |
Best Energy Stocks in Midstream and Infrastructure
Midstream and infrastructure names are key for long-term cash flows in energy investments. They connect production to markets. Investors look at contract mix, pipeline fees, and capital plans when choosing these stocks.
Energy Transfer offers a wide range of midstream assets. It includes oil, gas, NGLs, and refined products. Morningstar gives it a Medium uncertainty rating and no economic moat. The forward dividend yield is about 7.3 percent.
Management is focusing on natural gas transmission. This is supported by fractionation and Mont Belvieu export capacity. The stock is trading below Morningstar fair value, making it a good buy for investors.
Cheniere Energy is a global LNG exporter. It has a Wide economic moat and a Medium uncertainty rating. Most of its volumes come from long-term contracts.
The company uses both Sabine Pass and Corpus Christi assets. It also pursues smaller incremental train builds to reduce timing risk. Cheniere’s dividend yield is lower than midstream peers, reflecting its project-heavy capital profile and global commodity linkage.
ONEOK combines NGL fractionation and natural gas connectivity. It has a Narrow moat and Medium uncertainty. The company raised capacity through strategic acquisitions and ongoing projects.
Near-term NGL oversupply may pressure fee-based results. Growth toward export markets and connectors to Mexican facilities provide medium-term pathways to higher volumes and fee recovery.
Enbridge is among the largest North American pipeline owners. It moves a substantial share of liquids and gas. It also operates regulated distribution and renewables segments.
Long-term contracts and regulatory frameworks produce predictable cash flow. Large infrastructure players like Enbridge deliver dividend continuity and scale benefits. They face execution and regulatory risk on major projects.
Investors seeking the best energy stocks in infrastructure should compare contract tenor, tariff structure, and capital rolling plans. Assess dividend yield versus balance-sheet resilience. Factor in project backlog and the split between fee-based and commodity-exposed revenues when ranking top performing oil stocks and infrastructure energy stocks for a diversified portfolio.
| Company | Morningstar Rating | Economic Moat | Forward Yield | Key Strength | Notable Risk |
|---|---|---|---|---|---|
| Energy Transfer (ET) | Medium uncertainty | None | ~7.32% | Diversified midstream assets; Mont Belvieu fractionation | M&A history; acquisition risk |
| Cheniere Energy (LNG) | Medium uncertainty | Wide | ~1.02% | Long-term contracted LNG volumes | Project timing and global LNG pricing |
| ONEOK (OKE) | Medium uncertainty | Narrow | ~4.98% | NGL fractionation growth; gas connectivity | NGL oversupply pressure on fees |
| Enbridge (ENB) | Established large-cap | Regulated and contracted scale | Attractive dividend history | Multi-segment pipelines and renewables | Regulatory and project execution risk |
Top Renewable and Transition-Focused Energy Stocks
Renewable and transition-focused energy names offer stable revenue through long-term contracts. They are less affected by fuel-price swings. Investors look for predictable cash flow, project pipelines, and growth funding while keeping dividends steady.
Below is a comparison of companies and how to allocate investments for those looking into sustainable energy stocks.
NextEra Energy (NEE) combines large-scale wind and solar with regulated utility operations. It has steady cash flow from contracts and utility rates. This supports spending on upgrades and grid improvements. NextEra is a top choice for its scale and utility stability.
Brookfield Renewable (BEPC) has a diverse portfolio including hydro, wind, solar, and energy-transition assets. Its revenue comes mainly from long-term fixed-rate PPAs. This creates steady cash flow and visibility in development backlogs. Brookfield aims for strong funds-from-operations growth and measured dividend increases. It’s a solid choice for those looking at green energy stocks with growth and yield.
When balancing fossil-fuel winners with green energy stocks, clear allocation rules are needed. Income-focused investors might prefer midstream and large integrated producers for higher yields. Growth investors might look at renewable developers and utilities with clear PPA pipelines.
Risk managers should consider commodity-price sensitivity, regulatory transition risk, and capital intensity. This helps set target weights.
A good portfolio mix could include a core of regulated utilities and diversified renewables. Add a tactical sleeve of midstream or integrated names for yield. Include a satellite of renewable developers for growth. Rebalance based on changes in PPA backlogs, credit metrics, and commodity cycles. This approach helps compare and choose the best renewable energy companies and sustainable energy stocks.
How to Evaluate and Pick the Best Energy Stocks
First, set clear goals. Decide if you want income, growth, value, or to invest in new energy trends. This choice helps narrow down the best energy stocks to consider.
Key metrics to screen
Look at price and value gaps, and free cash flow yield. Check dividend yield and payout ratio for income. Also, examine debt and EBITDA for leverage.
For oil and gas, check costs and reserves. For renewable and midstream, look at project backlogs.
Qualitative factors
Consider the quality of assets and where they are located. The Permian, Delaware, and Williston basins are good for low costs. Look at how companies use their money and how they improve operations.
Also, check the stability of contracts, like long-term LNG deals.
Competitive advantages and Morningstar signals
Use Economic Moat ratings to find companies with strong advantages. Cheniere has a wide moat in LNG. Many oil and gas companies have narrow moats. Morningstar Uncertainty Ratings help size positions wisely.
Sector trends to watch
Watch natural gas demand and LNG exports. Follow NGL fractionation and export capacity. Also, track renewable energy prices and demand from data centers and EVs.
Keep an eye on regulatory changes and pipeline fees. New projects can unlock gas value.
Practical investing steps
- Define the investment objective and time horizon.
- Screen by valuation and cash-flow metrics listed above.
- Prioritize companies with clear capital-allocation frameworks and contract-backed revenues.
- Size positions relative to economic moat and uncertainty rating.
- Monitor macro drivers, quarterly execution, and project timelines such as major pipeline builds and Cheniere expansion phases.
Start with broker research and Morningstar screens. Rebalance when valuations change. A careful approach can help pick the best energy stocks and manage investments in the energy sector.
Conclusion
Energy investing rewards selectivity rather than broad exposure. Cash-flow durability, balance-sheet strength, and contract structure matter more than short-term price momentum.
A structured screening process helps align energy exposure with specific objectives, whether income, cyclical upside, or long-term transition themes.