These Two Energy Stocks May Be Attractive Plays For Different Reasons

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For much of this year, energy stocks were one of the very few places investors could hide in public equities, but that has changed. However, this could be a time to buy some of these stocks at a discount amid the more recent selloff.

Enphase Energy Inc (NASDAQ:ENPH) and Devon Energy Corp (NYSE:DVN) could be two attractive picks, allowing investors to approach the energy sector from both the traditional and green energy sides. Enphase has been having a much easier time than Devon, but Devon could stand to gain if oil prices resume their upward march.

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Enphase Energy

Enphase Energy manufactures and sells components for solar panel installations and battery energy storage units, both areas that appear primed for steady growth in the coming years. Specifically, Enphase makes solar micro-inverters that take the direct current generated by solar panels and converts it to alternating current. Additionally, the company's home energy storage device, IQ Battery, targets residential customers.

One of the best things about Enphase Energy right now is its move into European markets. Given the energy crisis stemming from Russia's invasion of Ukraine, the continent aims to shift away from Russian energy. This trend gives companies like Enphase Energy an opening.

The company's first-quarter earnings results were quite attractive, showing a 46% year-over-year increase in revenue with a gross margin of 41%. Earnings per share grew 41% to 79 cents. Enphase generated $90 million in free cash flow and storage shipments at 120 MWh, the high end of its guidance.

Enphase management guided for $490 million to $520 million in revenue for the second quarter with a gross margin of 38% to 41%. At the midpoint, that guidance implies a 60% increase in sales year over year. Enphase also expects to ship 130 to 140 MWh worth of storage capacity during the second quarter.

Aside from the robust fundamentals, one other thing investors might want to keep in mind is Enphase's stock buyback program. The company has authorized $200 million in share repurchases, which it can tap at any time. While Enphase is not particularly cheap right now, it appears to have some room to run up from current levels, given that it addresses attractive markets and stands to benefit from the European energy transition.

Devon Energy

The story with Devon Energy is different from Enphase, but there is plenty to like here as well, especially since it's unlikely that the oil price story is done yet despite the recent decline in prices. Devon shares are off by more than 20% over the last month, although they remain up by more than 17% year to date, potentially offering an attractive entry point after the recent selloff.

As a leading independent oil and natural gas exploration company in the U.S., Devon Energy is a lesser-known name in the energy sector. While Enphase is an attractive green-energy play, it's important to realize that the transition to green energy is still years off.

According to BP, renewable energy made up less than 4% of the energy consumed last year, so oil companies like Devon have plenty of room to run. Additionally, Europe is searching for sources of oil and gas to replace Russia, and Devon Energy could benefit from that.

Aside from its fundamentals and the trends in the energy sector, one of the most interesting things about Devon Energy is its dividend. The company's dividend yield has been quite high this year, approaching 10%, although it has declined to 6.77%. Devon pays out a quarterly fixed dividend of 16 cents per share plus a variable dividend that can range as high as 50% of its excess free cash flow.

While the high yield makes Devon attractive to fixed-income investors, it's important to realize that management adjusts its dividend frequently. A significant portion of the company's dividend is variable. For example, Devon Energy declared a fixed-plus-variable dividend of $1.27 per share based on its first-quarter earnings results, representing a 27% quarter-over-quarter increase.

However, management has guided for a dividend yield of 6.2% for this year, suggesting that Devon Energy could be a solid pick for dividend investors. Additionally, Devon Energy has paid out dividends every year for almost 30 years, backing up the view of it being a solid dividend pick.

Final thoughts

While the energy sector has sold off over the last month or so, Enphase Energy and Devon Energy both look like they could be attractive plays. Devon's dividend program is unusual, and investors who like dividend stocks may find the company to be a robust addition to their portfolios.

Enphase has shown a solid track record of growth with exposure to solar power and residential battery energy storage systems. Together, Enphase Energy and Devon Energy could be options for investors to attack the opportunities in the energy sector from both traditional and green energy.