All in, the oil sector looks like a terrible place to invest today. Unless, of course, the company you buy has the financial strength to keep investing in any environment and the track record to prove that it can and will do just that. Which is where Exxon and Chevron come in. These two industry giants have long histories of navigating the oil industry's ups and downs with relative ease. One place to see that is in their dividends, with each having increased their disbursements annually for more than three decades. Clearly, these companies know how to deal with industry downturns while still rewarding investors.
That basically means that Exxon and Chevron can outlast smaller players that take on greater financial risks by leveraging up their balance sheets. But this process is taking longer today because of the low interest rate environment. However, there's a good side to this because it is creating a huge opportunity for dividend investors who are willing to think long-term along with Exxon and Chevron. To put a number on it, their dividend yields, at 5.7% and 4.6%, respectively, are near their highest levels over the last 20 years.
An ETF that takes advantage of Exxon and Chevron is VDE, Vanguard Energy. The VDE ETF has an over 39.5% exposure to two of the world's leading oil companies: Exxon Mobile (XOM) and Chevron (CVX), VDE has net assets of $3.41 billion, trades an average of 558,819 shares each day, and charges an inexpensive expense ratio of 0.10%. The blended dividend yield of the ETF was at 3.87% at the end of last week at the $72.19 per share level. The chart below shows the top 10 holdings of VDE.
Two other ETFs to consider are FENY and IEZ.
(Disclosure: I have positions in VDE, FENY and IEZ)