Dividend hikes, higher earnings spur energy stocks rally in May

Energy companies far outpaced other sectors and the broader S&P 500 index in May, thanks to higher dividends, stellar first-quarter earnings, and a multibillion-dollar acquisition.

The S&P 500 Energy index logged a total return of 15.8%, followed by the S&P 500 Utilities index, with a total return of 4.3%, according to S&P Global Market Intelligence data. The broader S&P 500 index saw an increase of 0.2%.

Devon Energy Corp. topped the list of best-performing energy stocks with a total return of 28.8%.

On May 2, the company said it raised its quarterly dividend by 27% to $1.27 per share and expanded its share-repurchase authorization by 25% to $2.0 billion.

Marathon Oil Corp., which logged a total return of 26.5%, hiked its quarterly dividend by 15% to 8 cents per share and approved an increase in total share repurchase authorization to $2.5 billion.

Occidental Petroleum Corp. saw a total return of 25.8% in May.

The Houston-based oil company swung to a profit in the first quarter, from a loss in the year-earlier period, boosted by a jump in crude oil prices.

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Diamondback Energy Inc. recorded a total return of 23.4%.

Permian Basin producer Diamondback Energy agreed to acquire its pipeline spinoff Rattler Midstream LP for $2.2 billion as the industry continues to consolidate and the master limited partnership structure falls out of favor.

Pioneer Natural Resources Co. reaped a total return of 22.7%.

The Dallas-based oil exploration and production company posted net income of $2.0 billion in the quarter, compared with a loss of $70 million in the same period a year earlier.

Among utility stocks, NRG Energy Inc. led the sector with a total return of 28.2%.

NRG executives told analysts and investors on May 6 that the company does not have any near-term exposure to clean energy constraints and is "well-hedged" against commodity price volatility, with a portfolio of owned and contracted generation.

Pinnacle West Capital Corp. logged a total return of 9.1% in May. The Arizona utility is focused on summer preparedness with tighter market conditions across the Southwestern U.S., executives said, citing its nuclear capacity as critical for reliability.

Other top-performing utility stocks in May included Alliant Energy Corp., NiSource Inc. and AES Corp., with total returns ranging between 7.9% and 8.5%.

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