Another Dose of Good News for Energy ETFs

The Energy Select Sector SPDR (NYSEArca: XLE), the largest equity-based energy exchange traded fund, is 2016’s best-performing member of the sector SPDR suite of ETFs.

That after the energy sector was the worst-performing group in the S&P 500 last year and a drag in 2014 as oil careened into a bear market.

In addition to tumbling oil prices, one of the primary reasons investors ditched equity-based energy ETFs like XLE last year was the erosion of the energy sector’s allure as a dividend destination. In 2014 and 2015, no sector saw as many negative dividend actions, including cuts and suspensions, as did energy.

Related: 4 Energy ETFs may be at Near-Term Tops

Previous negativity surrounding energy sector dividends could be poised to give way to good news, meaning dividend increases and perhaps renewed payouts.

“Dividend investors should take a company-by-company approach. The financial strength of an exploration-and-production company isn’t the same as that of an integrated major like ExxonMobil (XOM). That company earlier this year declared a quarterly dividend of 75 cents a share, up from 73 cents, for a 2.7% hike. Markit expects ExxonMobil to lift its payout 5% next year,” reports Lawrence Strauss for Barron’s.

Some of this year’s dividend offenders from the energy patch should hold payouts steady next, which is certainly less bad news than negative dividend action.