Are investors looking at a rare opportunity to secure an enormous passive income stream while oil & gas prices surge? Or is this payout simply too good to be true?

A bond-like income opportunity?

Usually, when a dividend yield enters double-digit territory, it’s often due to cash flows falling far short of what’s needed to maintain shareholder payouts for the long run. But in the case of Energean (LSE:ENOG), that’s not what’s happening.

In fact, the firm’s cash flow is remarkably robust, backed by multiple long-term gas sale agreements. So much so that management has exceptional revenue visibility contracted for the next two decades. The result is a rare bond-like dividend profile, something that’s exceptionally rare for an oil & gas exploration & production company.

So if the business is both highly profitable and exceptionally cash generative, why’s the yield so high? What’s the catch?

A risky proposition

Energean’s risk doesn’t lie in its financials, but rather in its operations. The group has multiple projects scattered across the Mediterranean basin. However, its flagship production site sits 12km offshore from the Lebanon-Israel maritime border – a region that is an active conflict zone.

To add further uncertainty into the equation, it’s also practically next door to the US-Israel-Iran conflict.

The company already had to hit the pause button on production in June 2025 for roughly two weeks following the initial Israeli-US airstrikes. And just earlier this month, production was once again halted as war broke out in Iran.

If geopolitical tensions in the region continue to escalate, this temporary shutdown could turn into a protracted one. And it could have dire consequences on its cash flows, especially if Energean’s assets become targeted by Iran or its nearby proxies.

A risk worth taking?

If Energean’s operations can resume quickly, investors could indeed be looking at an exceptionally lucrative opportunity. Even more so, given that production volumes are on track to meaningfully rise over the medium term as more development-stage projects start extracting fossil fuels.

However, that’s a pretty big ‘if’. Production could remain offline for potentially months, depending on how the situation evolves. And that’s something Energean’s highly leveraged balance sheet may not be able to afford.

If conflicts de-escalate and peace returns to the region, this risk quickly disappears, making Energean look like a promising opportunity. But as things stand, the risk’s simply too high for my tastes.

Luckily, there are still plenty of other FTSE 250 dividend stocks offering attractive yields today at much lower risk levels.

The post This FTSE 250 stock pays a 10.1% dividend yield! appeared first on The Motley Fool UK.

Its near-10% ultra‑high yield reflects the scale of its cash flows, but also the market’s lingering scepticism about execution risk.

However, production from its core field, Karish, is bedding in, and management forecasts production will rise over the medium term.

So, what sort of dividend income are we looking at, and should I buy the stock now?

Earnings growth drivers

Sustained earnings growth underpins long-term gains in both dividends and share price. A risk to Energean is operational interruptions in its core Mediterranean assets. This occurred last year and in 2023 due to Middle East security tensions.

A shutdown in its small Katlan field is already scheduled this year as part of the wider development of its Israeli hub. This is aimed at reconfiguring the hub to deliver higher, more stable volumes in the medium term.

This is the first of three themes likely to push its earnings growth over time. The higher volumes after the upgrading of the hub will be utilised in long‑term, fixed-price domestic gas contracts. These will give the company a utility‑like revenue visibility.

The second is management’s aim to add a new project in discovered‑but‑undeveloped fields in West Africa by year‑end. The third theme is further exploration and development of existing prospects in Greece, Egypt and Italy. Several of these are located close to existing infrastructure, which would keep development costs and breakeven prices low.

Overall, analysts’ consensus forecasts are that Energean’s earnings will grow by an annual average of 8.2% to end-2028.

How much dividend income potential?

The shares currently yield 9.7%, based on a $1.20 (88p) dividend and the present £9.06 price.

Analysts project that the dividend yield will drop slightly over the 2026/2027 Israeli hub restructuring period — to 10.1%. By 2028 though, the consensus forecast is that it will be back to 10.3%.

By comparison, the current FTSE 250 dividend yield is just 3.5%, and the FTSE 100’s is 3.1%. So, investors considering a £20,000 holding in the firm could make £32,554 in dividends after 10 years and £342,866 after 30 years.

This assumes the 9.7% current and forecast yield, although this could also go down over the period. It also reflects the dividends being reinvested into the stock to harness the power of ‘dividend compounding’.

By that time, the holding could be worth £362,866, which could be paying £35,198 a year in dividend income by that point!

My investment view

I really would like to own this share. I believe its strong forecast earnings growth will power its dividend even higher in the years ahead, and its share price too.

Moreover, the likely strong dividend income would be a welcome boon to my retirement plans.

However, as of now, I already own other stocks in the sector — BP, Shell, and Harbour Energy. Having another would unsettle the risk-reward balance of my portfolio.

So, the best I can do right now is to put it at the top of my wait list should any of these start meaningfully underperforming.

That said, for other investors without this conundrum, I think Energean is well worth considering.

The post Should I buy this 9.7% ultra-high-yield FTSE income share right now? appeared first on The Motley Fool UK.

With both oil & gas shares taking a bit of a tumble over the last 12 months, it isn’t surprising to see the yield rise. And while such a large payout does signal risk of a payout cut in the future, there are always some rare exceptions.

So are these shares a classic dividend trap? Or could there be a lucrative passive income opportunity here?

Opportunities in fossil fuels

Harbour Energy and Energean are both independent oil & gas producers. Harbour’s the larger producer operating a geographically diversified portfolio across the UK North Sea, US Gulf Coast, Latin America, and North Africa, while Energean’s concentrated in the Mediterranean with the bulk of production near Israel and Egypt.

However, the way these companies generate revenue is a bit different. Harbour sells its oil & gas directly to global commodity markets, making it highly sensitive to fluctuations in global oil & gas prices.

By comparison, Energean relies primarily on long-term take-or-pay contracts. In oversimplified terms, these agreements ensure that customers buy a fixed volume at a fixed price that often rises with inflation. While that does mean Energean doesn’t benefit as much as Harbour Energy when oil prices rise, it also doesn’t suffer as much if prices fall.

Why are the yields so high?

The high-yield situation is different for both companies. Starting with Harbour Energy, the chief concern revolves around its 2024 acquisition of the Wintershall Dea project for $11.2bn. While this deal doubled its production capacity overnight, the company also became responsible for around $4.9bn of Wintershall Dea’s outstanding debts.

For the time being, current oil prices are enabling free cash flow generation to service its new obligations as well as maintain dividends. However, due to the group’s sensitivity to swings in the commodity markets, that could change very quickly if oil & gas prices drop.

In its May 2025 trading update, management revealed that a $5 drop in the price per barrel of Brent oil could wipe out $115m in free cash flow. And with fears of lower prices in 2026, the dividend could be vulnerable.

Due to its revenue model, Energean doesn’t share this weakness. However, with over half of its production located off the coast of Israel, investors are understandably concerned about potential geopolitical escalation. After all, the region isn’t exactly the most stable area of the world right now, which could lead to production disruptions.

What’s the verdict?

With both income shares facing substantial risks, it isn’t surprising to see the yield rise so high. This is a classic high-risk/high-reward scenario. However, out of the two companies, Energean seems to have an upper edge in terms of dividend sustainability in 2026.

Providing that production remains undisturbed, its lower sensitivity to commodity price swings offers far more cash flow transparency and resilience. That’s why I think it deserves a closer look from more aggressive income investors who are comfortable with volatility.

Having said that, I’m not rushing to buy the shares today. Instead, I’ve got my eye on other lucrative and lower-risk income opportunities for my portfolio.

The post 9.7% dividend yields! Should I buy these FTSE income shares? appeared first on The Motley Fool UK.

After years of heavy investment in its flagship gas projects, it is now shifting decisively into a higher‑margin, cash‑generating phase.

Recent results show revenue softening but profitability strengthening — a classic sign that the most capital intensive part of the cycle is behind it. And this transition should continue to support its ultra-high dividend yield, in my view.

So how much income could it generate over 10- and 30-year investment cycles?

Transition seen in the results

Energean’s full‑year 2024 results saw revenues up 25% year on year to $1.78bn (£1.32bn). Adjusted earnings before interest, taxes, depreciation, amortisation, and exploration expenses (EBITDAX) rose 25% to $1.16bn.

Meanwhile, production increased 24% to 153,000 barrels of oil equivalent (kboed), and operating cash flow surged 71% to $1.12bn. Net profit edged up to $188m, while leverage (net debt/ adjusted EBITDAX) fell from 3x to 2.5x.

With $20bn in long‑term gas contracts and core Israeli assets performing strongly, Energean entered 2025 as a maturing, cash‑generative business with dividend‑supporting momentum.

Its H1 2025 results reinforced this resilience, despite geopolitical disruption during the Israel/Iran conflict. Profit after tax rose 24% to $110m, while operating cash flow rose 5% to $555m. The company reaffirmed guidance for 145-155 kboed production.

It now has $1.175bn in liquidity and long‑term contracts. This makes it well‑positioned to sustain its dividend and unlock further value from its core Israeli assets.

A risk to this is any prolonged period of bearish gas prices. However, consensus analysts’ forecasts are that Energean’s earnings will grow 12.5% a year to end-2028. And it is ultimately this that powers any company’s dividends over time.

How much income can it generate?

Given its recent share price gains, Energean’s dividend yield has eased, albeit only to a still-remarkable 9.9%. This is more than triple the FTSE 100’s 3.1% average and over twice the FTSE 250’s 3.5%.

Analysts forecast that the payout to hover around 10% over the next three years. This could change over time, if the annual payout and/or the share price fell (which they could).

Nevertheless, using the current 9.9% yield, investors considering a £5,000 holding could make £8,402 in dividends after 10 years.

This also reflects the dividends being reinvested back into the stock — known as dividend compounding. It is a similar idea to leaving interest to quietly grow in a bank savings account.

On the same basis, the dividends would rise to £91,279 after 30 years. Including the original £5,000 investment, the holding would be worth £96,279 by then. And that would generate a yearly dividend income of £9,532 at that stage!

My investment view

Energean’s rising cash flow, long‑term gas contracts and near‑double‑digit yield make it a terrific income play, in my book.

That said, I cannot allow myself to buy it yet as I already own three other energy stocks — BP, Shell, and Harbour Energy. So adding another would skew my portfolio’s risk/reward balance.

Even so, its strong earnings growth prospects and ultra-high dividend yield look extremely compelling. Consequently, I think it is well worth considering for investors without my level of sector exposure.

The post Here’s how investors could aim for £9,532 in yearly dividend income from this 9.9%-yielding FTSE 250 high-yield gem appeared first on The Motley Fool UK.

One stunning prospect has recently emerged, with all three of the key elements I want in such a stock.

So, what is it, what are its three great qualities, and how much passive income could it make?

Three bases are loaded

The stock in question is FTSE natural gas giant Energean (LSE: ENOG). It first came to my attention when its dividend yield broke through the ‘magic’ 10% level. It is called that because over 10 years at the same interest rate, an investor’s funds would double.

This does not even include dividend compounding being used! This involves reinvesting the dividends back into the stock and produces much higher gains than not doing so.

The share has further magic for me because it satisfies the two other key criteria I look for in a standout passive income holding.

The first of these is its exceptional earnings growth potential. This is precisely what powers any firm’s dividends (and share price) higher long term.

A risk to Energean is an enduring period of bearish gas prices. However, consensus analysts’ forecasts are that its earnings will grow 21% a year to end-2027.

The final of the three key qualities is that a stock’s price should look enormously undervalued. A discounted cash flow analysis shows Energean is 59% undervalued at its current £8.85 price. Therefore, its ‘fair value’ is £21.59.

This is important to me, as if I want to sell the stock then I would like to make as big a profit as possible on it. And asset prices tend to converge to their fair value over time.

How much passive income?

I see a standard investment cycle for long-term investors as being 30 years. This roughly equates to starting around 20 and finishing with early retirement at around 50.

So, an investor considering a £20,000 holding in the firm would make £36,331 in dividends after 10 years! This is based on a 10.4% average yield with dividend compounding used.

On the same basis, this would rise to £138,661 after 20 years and to £426,880after 30 years. At that point, including the initial £20,000 stake, the total value of the investment would be £446,880.

And this would pay an annual passive income from dividends of £46,476.

That said, dividend yields change over time. This is because a stock’s price rises and falls and the annual dividend payout may be changed.

However, in the shorter term, analysts forecast that Energean’s dividend yield will increase to 10.8% in 2026, before dropping back to 10.5% in 2027.

My investment view

Unfortunately for me, I already own several stocks in the energy sector. Buying any more would disrupt the overall risk-reward balance of my portfolio.

However, I am seriously considering selling one of these to make way for Energean.

In any event, I think it’s extremely high yield, huge undervaluation, and exceptional earnings growth are well worth the consideration of other investors.

The post This superb passive income star now has a dividend yield of 10.4%! appeared first on The Motley Fool UK.

This far outstrips the FTSE 250’s 3.5% and the FTSE 100’s 3.1%. Indeed, there are very few shares of such quality that deliver such a return, in my view.

But is this dividend yield outperformance set to continue?

What’s the dividend yield outlook?

Consensus analysts’ forecasts are that the firm will pay a 92p equivalent dividend again this year, and next. In 2027 though, this is projected to increase to 95.4p. On the current share price, this means another two years of a 9.9% dividend yield, and then 10.2%!

These numbers are not rogue figures, incidentally. Energean paid the same $1.20 dividend in 2023, split into four 30-cent interim payments.

It has already made two interim payments of 30 cents this year, with two more expected.

What’s powering the dividends?

The engine of dividend (and share price) gains for any firm is growth in earnings. A risk to these for Energean is any sustained significant fall in natural gas pricing in the coming years.

However, analysts forecast that its earnings will grow by a strong 11.7% a year to end-2027.

This looks well-supported by its latest full year 2024 results, in my view. These showed strong operational growth, record production, and robust financials, underpinned by long-term gas contracts.  

More specifically, revenue soared 25% year on year to $1.779bn. Earnings before interest, taxes, depreciation, depletion, amortisation, and exploration expense (EBITDAX) jumped by the same amount to $1.162bn. This is a version of EBITDA used by gas and oil firms to include specifics relating to exploration and development costs.

So how much dividend income can it make?

Investors considering a £20,000 stake in Energean would make £33,607 in dividends after 10 years. This is based on the current average 9.9% yield. It also factors in dividend compounding being used.

On the same twin bases, the dividend income would jump to £365,117 after 30 years. I see this as the end point of a standard 30-year investment cycle. It begins around 20 years of age and ends around 50, with plans for early retirement.

Including the initial £20,000 investment, the value of the holding would be £385,117 by then. And this would generate a yearly dividend income of £38,127 at that stage!

My investment view

I am seriously itching to buy this stock. Its strong growth prospects should underpin further gains in its already huge dividend yield. This should mean even greater dividend income streams in my retirement.

The only problem I have here is that I already have holdings in BP, Shell, and Harbour Energy. So another oil and gas firm added to my portfolio could unsettle its overall risk/reward balance.

I may be able to talk myself into it at some point though. I am looking at its share valuation, and a discounted cash flow valuation shows it is 71% undervalued at its current £9.31 price. This means its ‘fair value’ is £32.10, which is not helping my self-control.

In any event, for investors without this problem, I think the stock is extremely well worth considering.

The post Investors can target £38,127 a year in dividend income from £20,000 in this ultra-high-yielding FTSE 250 gem – here’s how appeared first on The Motley Fool UK.

Sometimes a double-digit return can be a sign of trouble ahead rather than opportunity.

That’s why I’ve been looking closely at two FTSE shares with yields north of 10%. Both look attractive on paper, but I’m not convinced now’s the time to buy.

Energean

Energean‘s (LSE: ENOG) a London-listed oil and gas producer with operations across the Mediterranean and comes with a market-cap of around £1.64bn. The share price sits at roughly 890p, and the company’s dividend yield of 10.2% looks outstanding.

Profitability’s solid too – it boasts a return on equity (ROE) of 17.2% and a 7.5% net margin.

Over the past five years, Energean’s shares have risen 72.5%, a decent return considering how volatile the energy sector’s been. And with a price-to-earnings (P/E) ratio of just 10.2, it could even be described as a value play within the FTSE 250.

However, the one major concern that gives me pause is its £2.56bn debt load. That’s roughly five and a half times its total equity. The firm’s quick ratio – a measure of short-term liquidity – sits at just 0.47, suggesting limited cash on hand to meet obligations.

While cash flow from operations remains healthy for now, any downturn in energy prices could strain the business’s ability to service its debt, let alone maintain such a generous dividend.

That’s a risk I’d rather not take. For income investors, the yield might look mouthwatering, but I think it’s worth analysing how sustainable it really is.

Foresight Solar Fund Limited

The second FTSE share that caught my attention is Foresight Solar Fund (LSE: FSFL), which owns and operates solar energy assets across the UK and Europe. With a market-cap of £430m and a share price of 78p, it’s a much smaller player than Energean – but its 10.3% yield has certainly grabbed the market’s attention.

Foresight’s financials look strong at first glance. The balance sheet‘s clean, with no debt and a quick ratio of 3.42. It’s also been increasing dividends for eight straight years, which adds a touch of reliability. Revenue rose 8.84% year on year in its latest results, showing decent operational performance despite industry pressures.

However, the dividend coverage is a major concern. The company’s cash dividend coverage ratio stands at just 0.53 – well below the comfort level of 2 or higher. Meanwhile, its earnings per share (EPS) of 1p doesn’t come close to covering its 8p dividend per share. In simple terms, it’s paying out far more than it earns, which is rarely sustainable for long.

Unless earnings rebound, the fund might have to trim its dividend. That would likely send income-focused investors running for the exits.

Final thoughts

Both Energean and Foresight Solar Fund have attractive business models and operate in essential sectors. Yet the combination of high yields, fragile coverage and sector-specific challenges makes me cautious.

Those dividends might not be sustainable under current conditions. If cuts come, the share prices could tumble further. For now, I’ll keep both on my watchlist – but until their earnings and cash flow improve, I think there are safer FTSE shares to consider for reliable passive income.

The post 2 high-yielding FTSE shares that look tempting – but I’m not buying yet appeared first on The Motley Fool UK.

As FTSE 100 and 250 valuations have surged over the past year, these have become more difficult to find. This is because a stock’s dividend yield moves in the opposite direction to its price.

Nevertheless, every now and again my personal stock screener flags such a stock. And it did so recently with Energean (LSE: ENOG).

What does it pay?

In 2024, the natural gas exploration and development giant paid a dividend of 120 cents (90p). It gives a dividend yield of 10.1% on the current £8.90 share price. This is not a fluke as it paid the same amount in 2023, and in 2022 it paid 90 cents.

Moreover, analysts forecast that its dividend yield this year will be 10.3%, next year 10.4%, and in 2027 10.5%.

Of course, the key long-term driver for any firm’s future dividends (and its share price) is earnings growth.

A risk to Energean’s is any prolonged period of bearish gas prices. However, analyst consensus is that its earnings will grow by an annual average of a whopping 49% to end-2027.

So what’s the passive income?

Investors considering a £20,000 holding in the firm would make £34,680 in dividends after 10 years. This is based on the current 10.1% dividend yield, and on the use of dividend compounding. After 30 years on the same basis, the dividends would rise to £388,729.

Including the initial £20,000 investment, the total value of the Energean holding would be £408,729. And this would deliver a superb annual passive income from dividends of £41,282!

Potential share price gains too?

As mentioned, earnings growth does not just power rises in dividends but in share prices too.

So where might Energean’s go? The best way I have found to determine this is the discounted cash flow (DCF) valuation model. This shows Energean shares are 49% undervalued at their current £8.90 price. Therefore, their ‘fair value’ is £17.45.

In my experience as a former senior investment bank trader and private investor for over 35 years, asset prices eventually tend to converge to their fair value.

My investment view

I was going to buy Energean very recently but could not decide which of my other energy stocks to sell. Having three – in addition to Shell and BP – would unsettle the risk/reward balance of my overall portfolio.

I was toying with the idea of unloading my Rio Tinto holding, as it is also in the commodities sector. But I am loath to do that as it has also performed well.

One thing I am certain of though, is that Energean’s terrific earnings prospects put it top of my watchlist. If any of these stocks start underperforming, then I will switch.

For those investors without such a conundrum however, I think Energean is seriously worth considering as a key passive income holding.

The post Here’s how investors could target £41,282 of annual passive income from £20,000 in this dividend gem appeared first on The Motley Fool UK.

One thing is clear. Those cracking dividend yields have been pushed up by falling share prices — just look at the 12-month change column in the table.

I think there’s a good chance the market has got it wrong here. And if these dividends keep going for another year or two, we might be looking at a list of top recovery candidates.

So what should we do about these depressed stocks today? Let’s look at two from the table.

Renewable energy

Renewable energy is somewhat out of favour as the world — especially the US — backtracks on previous targets. And my pick, SDCL Efficiency Income Trust, invests in energy-efficient projects globally — including North America.

At full-year results time in June, CEO Jonathan Maxwell spoke of “global economic and geopolitical uncertainty.” But he added that the company’s assets “delivered growing operational performance, in line with expectations, to fully cover dividends.”

Chair Tony Roper said the board is “frustrated that our share price has drifted down and our shares continue to trade at a material discount to NAV per share.” And the company is considering “strategic options to deliver value.”

The discount? At the time, the trust’s net asset value (NAV) per share stood at 90.6p. So for 55.9p per share we can buy 90.6p in renewable energy assets — that’s a whopping 38% discount.

Oil and gas

Seeing Energean in the list surprised me, as it’s a nicely profitable oil and gas producer. It operates in the Eastern Mediterranean region, including Egypt, Israel… and not far from Iran. Oh, maybe it’s not such a big surprise.

Still, Energean is functioning fine — fingers crossed. In the first half, reported 11 September, the company posted a 24% rise in profit after tax with earnings per share up 25%. CEO Mathios Rigas said that “we are therefore pleased to declare our regular quarterly dividend.”

He also told us the company had “secured over $4bn in new, long-term gas contracts that brings the total value of contracted gas to around $20bn for the next 20 years.“

Forecasts put Energean on a forward price-to-earnings (P/E) ratio of only 5.2.

Time to buy?

Here we have two companies that are doing fine operationally and look good value on that. But each faces significant geopolitical risk.

I reckon investors who can handle that and look for longer-term dividend opportunities might do well to consider both. Together they might even make a nice hedge in the renewables versus hydrocarbons divide.

The post These FTSE 250 dividend stocks offer huge 10%+ yields. Can we afford to miss them? appeared first on The Motley Fool UK.

This compares to the current average FTSE 100 dividend yield of just 3.4% and the FTSE 250’s 3.3%. It is also more than double the ‘risk-free rate’ (the UK 10-year government bond yield) of 4.6%.

Moreover, analysts forecast that the oil and gas firm’s dividend yield will stay the same this year. In each of the next two years, it is projected to rise and hold around 11%.

How much passive income can be made?

On the current 10.4% yield, a £10,000 investment would make me £1,040 in first-year dividends. This would increase to £10,400 over 10 years on the same average rate and to £31,200 after 30 years.

This is a lot more than can be made from even the risk-free rate or from any regular savings account. However, it could be far greater if the standard investment practice of dividend compounding were used.

This simply involves reinvesting the dividends paid by a stock straight back into it. It is a similar concept to leaving interest to accrue in a savings account.

Using this method would generate £18,166 of dividends after 10 years, rather than £10,400. And after 30 years on the same basis this would increase to £213,440, not £31,200.

Including my initial £10,000 investment and the total value of my Energean holding would be £223,440 by then. And this would deliver a yearly passive income to me of £23,238!

How are its earnings prospects?

The key factor that supports dividend gains (and share price rises) over time is a firm’s earnings (profits).

A risk to Energean’s is any sustained bearish trend in oil and gas prices. That said, the demand side for energy looks to be strengthening, along with the economic prospects of the world’s largest energy importer, China. And the supply side looks like it may weaken, given the current ramping up of sanctions on Russia, Iran, Iraq, and Venezuela. These factors should support energy prices.

Indeed, analysts forecast that Energean’s earnings will grow by a stunning 39% a year to end-2027. Moreover, its 11 September H1 2025 results showed profit after tax jumping 24% to $110m. Cash flow from operating activities rose 5% to $555m. And the interim dividend remained at 60 cents.

A share price bonus too?

My overriding concern in a dividend stock is that these payouts keep generating a high yield. But a rise in the share price is also welcome, of course, in case I want to sell the stock.

Its high earnings growth prospects should power Energean’s share price higher (as well as its dividend) but by how much? In my experience, the discounted cash flow method is the best way for finding this out. It pinpoints where any stock should trade, based on cash flow forecasts for the underlying business.

In Energean’s case, it shows the shares are 37% undervalued at their current £8.58 price. Therefore, their fair value is £13.62.

Given its high earnings growth forecasts, ultra-high yield, and significant undervaluation I will buy the stock very soon.

The post Following solid H1 results, is it time for me to buy this 10.4%-yielding passive income star? appeared first on The Motley Fool UK.