Check out this stock on oil bounce: Expert
With a brief recovery in oil prices and the sector's stocks still cheap, investors could start picking away at companies with stable dividends, one money manager said Monday.
U.S. crude oil (New York Mercantile Exchange: @CL.1) has spiked more than 27 percent in the last three days, the biggest gain in such a time frame since 1990. Despite rising more than 1 percent Monday, the Energy Select Sector SPDR Fund (NYSE Arca: XLE) has lost about 16 percent this year.
Though oil stocks look appealing at their current levels, investors need to choose dividend names carefully as low crude prices have recently pressured payouts, said Danielle Hughes, CEO of Divine Capital.
"If you're a long-term investor, you're going to understand that eventually oil is going to come back up," she said in a CNBC "Closing Bell " interview. "However, you have to look at companies that have a track record of actually paying out their dividend over a long period of time."
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Offshore driller Transocean (NYSE: RIG) became the latest energy company to suspend its dividend last week. But shares of companies like Royal Dutch Shell (London Stock Exchange: RDSA-GB)-which have fallen more than 20 percent this year-are worth a look, as they have historically shown they can keep up with dividend payouts, Hughes contended.
Still, oil's recent move may not fully reflect the sector's momentum, said Tim Seymour, managing partner at Triogem Asset Management and a CNBC contributor. He noted that traders may have reacted to what they wanted to hear from OPEC .
Seymour said, also on "Closing Bell," that reality for the oil industry may sit somewhere between recent lows and the optimistic three-day spike.
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