Sceptical of green energy? Good news - fossil fuels are still very investable

Enthusiasm among investors for green energy is bifurcated. 

Institutional investors love it. Retail investors... less so. 

Anecdotally, Livewire subscribers are, shall we say, skeptical of the green energy transition. Here are some of the more colourful comments populating the site. 

"Economic suicide guaranteed"

"The only people making money from ESG are consultants"

And that's fine. Not every investment thematic works out. Nor is skepticism unwelcome here at Livewire. In fact, it's encouraged. 

"[Green energy ETFs] came out of that same growth chasing mentality and stocks that weren't great businesses that were perceived to be high growth opportunities ended up on high multiples," notes Jacob Mitchell, CIO of Antipodes Partners, in the latest episode of The Rules of Investing. 

"And then, you know, they're struggling because the multiples never made sense."

The great thing about the energy transition is that, for the foreseeable future, it will rely on the energy system it's replacing. 

"The energy transition doesn't mean oil hydrocarbons are dead," agrees Mitchell. 

"From a pragmatic value perspective, we have exposure to oil."

If you count yourself as a green energy skeptic, an ongoing fan of legacy energy companies, or just appreciate a bit of energy diversification in your portfolio, here are three energy stalwarts brokers have recently rated OUTPERFORM or BUY. 

AGL Energy (ASX: AGL)

Electricity and gas operator and retailer AGL Energy is in a good position thanks to higher power prices (winter) and a normalising generation fleet. 

According to Macquarie, "The FY24E recovery is well flagged, and the FY25E forward curve suggests recovery this will be sustained medium term. We expect further momentum through FY27E-28E when transmission adds capacity and deepens markets."

The broker does however underscore regulation as the key risk to the sector, via the possibility of price-distortions from retail subsidies. 

Income investors may be left feeling underwhelmed by the company's dividend trajectory, however. It paid out 16 cents per share in 1H FY22; 74% less than the 31 cents per share it paid out in the previous corresponding period. 

Origin Energy (ASX: ORG) 

Macquarie is similarly bullish on Origin Energy.  

It's a case of no news is good news.  

LNG volumes reported in the company's third quarter results were in line with guidance, despite softer than expected domestic prices, while electricity volumes came through as expected. 

Origin's dividends are decidedly more attractive than AGL's. Over the past year it's paid out 33 cents per share, representing a 65% increase over the previous year. 

Santos (ASX: STO)

With all eyes on Santos' Barossa drilling project and its slated 5% sell down of the PNG LNG asset to Kumul Petroleum Holdings Limited, Macquarie reckons the market is under-appreciating the potential windfall from the Dorado oil development in the Bedout sub-basin in offshore Western Australia, should a final investment decision on the project be made. 

"Fully unrisked, STO's stake in Dorado has a roughly similar value to its stake in Barossa."