The challenge for energy equities is that some oil market observers see more declines coming for crude. Oil traders are concerned over how fast U.S. shale oil producers will increase production to capture the rising prices.

Investors considering ETFs such as XLE and rival ETFs such as the Fidelity MSCI Energy Index ETF (NYSEArca: FENY) and the Vanguard Energy ETF (NYSEArca: VDE) need to again monitor the dividend situation at energy companies.

“…can it cover its dividends from cash flow even at current oil prices? Many integrated oil companies are making progress on this front, but only a fraction has achieved satisfactory dividend coverage just yet. We are even more selective when it comes to U.S. E&P companies, as they are more prone to oil-price changes and changing financing conditions. We believe they need to have excellent oil fields in order to be investable,” according to a Deutsche Asset Management note seen in Barron’s.

For more information on the oil market, visit our oil category.