3 Energy Stocks I'd Buy Right Now

By Markets Fool.com

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The recent downturn in the energy industry has had a profound impact on how I look at stocks and the kinds of companies that I'm willing to buy. I'm not interested in fly-by-night producers that are completely reliant on oil prices to make their hay, or highly levered companies that could blow up if things don't go just right. Rather, I want well-managed businesses that have the legs to handle the ups and downs of the market that are likely to happen when you own a stock for years or even decades. Today. three stocks that look particularly compelling to me are French oil giant Total (NYSE: TOT) and pipeline companies Enterprise Product Partners (NYSE: EPD) and Holly Energy Partners (NYSE: HEP). Here's a quick look at why each of these companies looks attractive today.

Outstanding operational performance

The integrated oil and gas industry has taken a -- possibly deserving -- spanking from the market in the last year or so. Most of them were caught spending boatloads of money on megaprojects that didn't necessarily make as much sense at today's prices. What's even worse is that they had to take on unusually large debt loads to fill the gaps between cash flows and spending needs. All the while, earnings plummeted as some sources of production did not turn to be as economical as previously thought.

The one big oil company that has bucked that trend is Total. Most of its major projects were either competed in 2015 or are wrapping up in 2016, which has allowed it to rapidly cut its capital budget without having to shelve future projects. It also helps that many of those new projects were able to generate returns at much lower prices. That is why, in 2015, Total's net income only declined 18% while the rest of its big oil peers saw net income declines greater than 40%.

With a decent suite of low-cost production sources online, a few more low-cost sources on schedule to increase production by 4% annually between now and 2019, and improving performance from its non-production business segments, shares of Total look pretty compelling. If that isn't enough, there is also the company's dividend, which yields 5.7% today.

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Priced like the rest, managed like the best

Enterprise Products Partners is one of those companies where you wonder why Wall Street has soured on it so much. In the past 12 months, the company's shares have declined 6%. These kind of performance would suggest that the company has not been doing so hot, but Enterprise's earnings results seem to suggest otherwise.

Since more than 85% of the company's gross profits are generated from fee-based contracts and have little correlation to commodity prices. Enterprise's distributable cash flow has actually grown despite low commodity prices and declining overall production volumes across the U.S. That, and the prudent management of the company's cash flow, has given the company plenty of wiggle room to maintain its streak of growing its payout every quarter for 48 consecutive quarters. Considering that Enterprise still generates more than enough cash to cover its current distribution, there aren't a whole lot of reasons to believe that this streak will end anytime soon.

Seeing such tepid stock performance over the past year may not excite investors into buying today. On the other hand, consider this: Today, shares of Enterprise have a distribution yield of 6.1%. That's a pretty decent quarterly paycheck you can cash to wait for either the oil and gas market to rebound or until Wall Street realizes that this is a top-notch stock worth buying.

Same idea, smaller company, bigger yield

Holly Energy Partners shares a lot of the qualities that Enterprise Products Partners has that makes it a worthwhile investment. Holly Energy Partners also has very strong protection from commodity prices. In fact, 100% of its revenue comes from fixed-fee contracts that pretty much ensure there is no commodity-price-related fluctuation in the company's earnings. Also, like Enterprise, Holly Energy Partners' management has taken a rather conservative approach to its payout to its shareholders. The company's distribution coverage ratio -- a common metric for measuring the robustness of a master limited partnership's payout -- was a very solid 1.6 times in the most recent quarter, which suggests the company has plenty of room to increase its payout for a while without any new growth baked in.

Fortunately, though, there is some new growth baked in. Holly Energy Partners' management estimates that its recent acquisitions and organic development projects will add $107 million in EBITDA in 2017 compared to 2014's results, or about 40%. That should leave the partnership plenty of room to maintain its streak of 47 straight quarters of dividend increases.

There is one more thing that makes Holly Energy Partners like Enterprise. Its shares haven't performed too well over the past year, and that has led the company to have a very attractive yield of 7.2%. There aren't a whole lot of stocks out there today that have both security of payout and a high yield like Holly Energy Partners, and it makes an investment look very attractive.

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Tyler Crowe owns shares of Enterprise Products Partners.You can follow him at Fool.comor on Twitter@TylerCroweFool.

The Motley Fool recommends Enterprise Products Partners and Total. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.