The energy sector is experiencing significant growth this year, boasting a 12.9% increase so far. This impressive performance places energy above materials, marking it as the leading stock market sector in 2026.
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If you’re looking for high yields, energy stocks are a solid choice right now.
Two companies to keep an eye on are ConocoPhillips (NYSE: COP) and Kinder Morgan (NYSE: KMI), both of which could surprise investors with potential passive income in 2026.
ConocoPhillips is notably the largest exploration and production company in the U.S. by market cap, following closely behind the likes of Exxon Mobil and Chevron.
Not too long ago, ConocoPhillips removed its variable dividend structure to concentrate on boosting its regular quarterly dividend. The objective? Aim for the upper quartile in dividend growth compared to the S&P 500 (SNPINDEX: ^GSPC). Essentially, they’re looking to not just increase dividends but to do so at a fast pace.
The ability to grow dividends stems from ConocoPhillips’ efficient asset portfolio. They plan to significantly reduce their breakeven free cash flow (FCF) level to the low $30s per barrel of West Texas Intermediate (WTI) crude oil by the end of this year. Currently, WTI is hovering in the mid-$60s range. It’s worth noting that despite challenges during the 2020 oil crash, WTI prices averaged $39.16 a year, and prices hadn’t dipped below $30 in any year since 2002.
To accomplish this, ConocoPhillips is focusing on advancements in technology for exploration and production, enhancing efficiency, and prioritizing high-quality operations over mere production expansion.
With a dividend yield of 3.3%, ConocoPhillips is emerging as one of the top upstream oil and gas stocks to consider now, particularly appealing for long-term investors.
On the other hand, Kinder Morgan is currently trading near a ten-year peak after releasing its fourth-quarter and unrestricted full-year results from 2025. Forecasts suggest a 5% rise in adjusted net income for 2026 compared to the previous year, alongside a matching increase in adjusted earnings per share.
The predictability in Kinder Morgan’s earnings is quite robust. This stems from the fact that approximately 70% of its anticipated cash flows for 2026 are secured through take-or-pay contracts or hedges, meaning customers commit to reserving capacity regardless of usage.
While Kinder Morgan’s growth projections may appear modest, it’s important to remember that it’s poised to record its highest profits in a decade.
Since early 2022, Kinder Morgan’s capital expenditures have been on the rise. Initially, it was merely a bounce-back from the pandemic. However, there are substantial long-term growth factors encouraging increased investment in energy infrastructure.
Artificial intelligence is contributing to grid expansion, while natural gas remains the primary source for electricity generation in the U.S. Furthermore, the U.S. has emerged as the world leader in liquefied natural gas (LNG) exports. Kinder Morgan is a vital player in the LNG landscape, transporting gas from production hubs like West Texas to liquefaction and export facilities along the Gulf Coast.
Interestingly, unlike in earlier years when Wall Street pushed back against oil and gas sector spending, Kinder Morgan is now encouraged to pursue longer-term projects. This shift is likely to bolster FCF and support dividend growth.
With a dividend yield of 3.9%, Kinder Morgan is also a strong candidate for investment, especially since it plans to partner with ConocoPhillips in 2026.
Before making any decisions about investing in ConocoPhillips, here are some things to ponder:
According to Motley Fool Stock Advisor, their analysts have pinpointed other stocks believed to be strong contenders right now—ConocoPhillips was not in their top ten. These stocks might show remarkable returns over the coming years.
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No identifiable positions in the mentioned stocks. The Motley Fool recommends Chevron and Kinder Morgan, along with ConocoPhillips.
