The announcement of a two-week ceasefire between the U.S. and Iran led to a steep drop in oil prices on Wednesday, but the pullback could very well be temporary.
Crude prices dropped below $100 per barrel, although this remains an optimal level that creates superior operating leverage for oil producers.
Notably, the truce is contingent on Iran reopening the Strait of Hormuz, which accounts for 20% of global oil flows.
That said, Iran announced later this morning that the critical shipping route will remain closed if Israel continues its attacks in Lebanon, which is a stronghold for Iranian-backed militant groups.
This raises further concern that the ceasefire between the U.S. and Iran could be very short-lived and that crude prices will likely remain elevated.
With many oil stocks recently trading at new all-time highs or at 52-week peaks, it could be an ideal time to start eying the best buy-the-dip candidates.
Providing a hedge against recent market volatility, these three oil stocks are standing out on the Zacks Rank #1 (Strong Buy) list and are even more appealing because of their generous dividends.
BP – BP
Stock Price: $45
Dividend Yield: 4.18%
Trading near a 52-week high of $48 a share, BP BP) stock has spiked 30% year to date and still trades at an attractive 13X forward earnings multiple. The global energy producer has been able to capitalize on higher oil prices and is also an attractive pick for the future of renewable energy, expanding its portfolio in low-carbon businesses.
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BP has increased its dividend six times in the last five years for an annualized growth rate of 11.84% during this period. Strong cash flow and solid operational performance suggest BP’s dividend is reliable, producing $24.5 billion in operating cash flow in 2025.
BP’s payout ratio of 69% is a bit high, but its debt-to-capital (D/C) ratio is near the preferred level of 40% or lower and is also supportive of a sustainable dividend.
Bringing in more than $200 billion in annual revenue, BP’s increased profitability should be apparent amid high crude prices, with it noteworthy that FY26 EPS projections have skyrocketed over 50% in the last 60 days from estimates of $2.57 per share to $3.92. Plus, this would reflect a 36% increase from EPS of $2.88 last year.
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Chevron – CVX
Stock Price: $192
Dividend Yield: 3.53%
Strategic expansions have continued to make Chevron CVX) one of the most dominant fully-integrated oil companies in the world. Chevron stock is still up a respectable 20% YTD, despite a 10% pullback from an all-time high of $214 a share, which it hit last month.
Suggesting that this could be a buy-the-dip opportunity is that Chevron’s FY26 EPS estimates have soared 38% in the last two months from $6.55 to $9.04. CVX is trading at a reasonable 22X forward earnings multiple, and EPS is now projected to rise 24% this year from $7.29 in 2025.
As a dividend aristocrat, Chevron has increased its dividend for 39 consecutive years with an annualized dividend growth rate of 6.35% in the last five years.
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While Chevron’s 93% payout ratio is very high, it's caused by distorted earnings rather than weak cash flow. To that point, Chevron’s earnings were impacted by non-cash accounting adjustments when it acquired Hess Corporation last year, which gave it access to a 30% stake in the Stabroek Block offshore of Guyana, one of the world's largest oil discoveries in the last decade.
Acquiring Hess also brought 463,000 acres of high-quality assets in the Bakken Shale, a major oil-bearing rock formation located mainly in North Dakota and Montana within the coveted Williston Basin.
Having a generous dividend yield that’s over 3%, Chevron has one of the strongest balance sheets in the industry with a D/C ratio that’s under 20%.
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Chord Energy – CHRD
Stock Price: $134
Dividend Yield: 3.58%
Rounding out this list of high-yielding oil stocks to consider on the dip is Chord Energy Corporation CHRD), a leading exploration and production (E&P) company that was formed through the merger of Oasis Petroleum and Whiting Petroleum in 2022.
Chrod Energy stock has soared 40% this year and has pulled back from a recent 52-week high of $148 a share. CHRD trades at an enticing 12X forward earnings multiple and in the last 60 days has seen its FY26 EPS estimates skyrocket from $4.22 to $12.06.
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Like Chevron, Chord Energy has assets in the lucrative Williston Basin. Analysts have also turned bullish thanks to Chord Energy’s strong free cash flow and balance sheet with a D/C ratio of just 15%. Plus, the company has lifted investor sentiment with a $1 billion share repurchase program.
Appeasing income investors, Chord Energy has increased its dividend by 26.53% in the last five years and has a rather healthy 55% payout ratio.
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Bottom Line
Despite the announcement of a temporary ceasefire between the U.S. and Iran, the rotation into oil stocks is still desirable.
Out of 202 stocks on the coveted Zacks Rank #1 (Strong Buy) list, 31 hail from the energy sector, with these three oil stocks standing out with dividend yields that are above 3%. Most importantly, in regards to their strong buy rating, is that the trend of positive EPS revisions suggests more upside is likely ahead, making them ideal buy-the-dip targets.
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This article originally published on Zacks Investment Research (zacks.com).