2 High-Yield Energy Growth Stocks to Buy Now

Global energy demand experienced a notable surge in 2024, climbing 2.2% overall. This growth was heavily driven by a 4.3% increase in electricity consumption, fueled by extreme heatwaves, strong industrial activity, and ongoing electrification trends across sectors. Renewables and nuclear power were the primary beneficiaries, generating 80% of the new electricity added to the grid.

These low-carbon sources now account for 40% of total electricity generation, reflecting significant progress in decarbonizing the power sector. However, rising power needs also boosted natural gas demand to cover additional requirements, while oil growth remained comparatively sluggish at just 0.8%.

The transition isn't without its regional nuances. Coal demand saw a modest 1% rise globally, but this growth was concentrated in emerging markets, particularly China and India. Heatwaves in these countries, coupled with expanding energy infrastructure needs, drove their coal consumption higher. This underscores both the ongoing reliance on coal for baseload power in rapidly developing economies and the significant penetration opportunities available for cleaner alternatives like solar, wind, and nuclear in these regions. The overall trend, however, shows a clear shift: economic expansion and rising energy needs are increasingly decoupling from fossil fuel emissions, as renewables and nuclear provide the bulk of new supply.

Chevron offers a 4.4% dividend yield, well above the energy sector average of 3.2% and ExxonMobil's 3.6%. This yield advantage is reinforced by a 38-year streak of dividend growth, underscoring its long-term commitment to income investors. Those seeking higher yields in the energy space may view Chevron as a top choice.

The company's production engine remains strong, with oil output at 13.2 million barrels per day. This volume underpins robust cash flow generation, even as U.S. energy production reached a record of 103 quadrillion Btu in 2024. That growth was driven largely by oil and natural gas, with crude oil accounting for 27% of total output.

Emerging market expansion is a growing part of Chevron's strategy, though specific penetration rates remain undisclosed. These markets can offer higher returns but also bring volatility and regulatory risks. Investors should note that while emerging economies often grow faster, they can experience sharp policy or commodity price swings that affect profitability.

Chevron's financial position remains solid, with a low debt-to-equity ratio that provides flexibility. Still, any yield advantage must be weighed against the inherent risks of operating in politically sensitive regions and the cyclical nature of oil markets. Volatility can quickly erode cash flow, which would ultimately affect dividend sustainability.

The combination of a yield above the sector average and sustained production gives Chevron a compelling profile for income investors, provided they acknowledge the associated risks of global energy operations.

ExxonMobil: Resilient Growth Engine

ExxonMobil maintains a compelling yield profile, offering a 3.6% dividend yield that exceeds the energy sector average of 3.2%, though it lags behind Chevron's 4.4% in income appeal. This resilience is underpinned by remarkably low leverage, with a debt-to-equity ratio of just 0.16 according to financial analysis. While this financial strength supports consistent shareholder returns, investors should note oil price volatility remains a core risk, capable of swiftly impacting earnings and future payout capacity.

Beyond income stability, Exxon's growth trajectory appears anchored in evolving energy demand. The company benefits indirectly from robust industrial activity, notably GE Vernova's expanded gas turbine backlog. This backlog reached 62 gigawatts, reflecting strong demand for power generation infrastructure supporting critical facilities like data centers. Furthermore, electrification revenue in this sector surged 32% year-over-year, signaling significant growth momentum. However, realizing substantial returns from these long-term energy transition bets involves execution risk; project timelines and capital deployment can encounter delays or cost overruns, potentially impacting near-term cash flow and growth projections.

Risks and Catalysts

The energy sector faces a dual challenge of policy uncertainty and geopolitical volatility, even as demand continues to rise.

Policy risks are mounting with the phase-out of renewable energy tax credits. The 2026 Deloitte Renewable Energy Outlook forecasts that tax credits for wind and solar projects will phase out by 2026. This could slow renewable growth and prolong fossil fuel dominance, but it also introduces uncertainty that may pressure fossil fuel companies if renewable technologies become more competitive without subsidies. Additionally, the phase-out might lead to a slower energy transition, which could have long-term regulatory and reputational risks for oil majors.

Geopolitical shocks pose significant risks to oil demand. Global energy demand surged 2.2% in 2024, with electricity consumption rising 4.3%, driven by extreme heat, industrial growth, and electrification. Coal demand rose 1% in 2024, largely due to heatwaves in China and India, demonstrating how regional events can disrupt energy markets and impact oil demand. Such volatility can lead to unpredictable oil pricing and demand fluctuations.

Despite these risks, Chevron's expansion into emerging markets and Exxon's gas turbine orders are well-positioned growth catalysts. The 2024 demand surge, particularly in emerging economies, creates opportunities for companies with strong regional presence and infrastructure capabilities.