As U.S. equity markets trade near all-time highs, coming back from their March lows, several sectors have been left behind, notably banking and energy. I believe that oil stocks are poised for a rally in the coming quarters. Last month, Fitch Ratings forecast that global GDP will fall by 4.4% in FY 2020, which implied a “modest upward revision from the 4.6% decline expected in the June.” Deutsche Bank also believes that the global GDP will “return to pre-virus levels by mid-2021.” In another forecast, the Organisation for Economic Co-operation and Development expects 5% GDP growth in the coming year.InvestorPlace – Stock Market News, Stock Advice & Trading Tips The point I am trying to make here is that the worst is possibly over for the global economy. It also implies that demand for oil will increase in the coming quarters. Crude oil prices have also stabilized, as evidenced by recent price action in commodity-based exchange-traded fund United States Oil Fund, LP (NYSEARCA:USO), and is likely to trend higher with demand growth. 7 Airline Stocks to Buy on Pelosi Stimulus Hopes Considering this macro outlook, it’s a good time a consider exposure to some fundamentally strong oil stocks, specifically four oil stocks with a healthy dividend pay-out. Even if the stock price is sideways, investors can benefit from dividend cash inflow. Let’s take a deeper look into the following stocks. CNOOC Limited (NYSE:CEO) Chevron Corporation (NYSE:CVX) Equinor (NYSE:EQNR) Marathon Oil (NYSE:MRO) 4 Oil Stocks to Buy as the Price of Crude Stabilizes: CNOOC Limited (CEO) Source: Shutterstock I like CEO stock for two primary reasons. CNOOC currently pays an annual dividend of $8.37 and at current levels, has an attractive yield of 8.9%. Further, the stock trades at a price-to-earnings-ratio of just 8.3. Therefore, in addition to dividends, the stock is likely to trend higher in the coming quarters as oil prices recover. Amidst a downturn in the industry, another positive fundamental factor is that CNOOC has a gearing ratio of 25%. With low leverage, the company has ample financial flexibility. Since the company has an annual dividend pay-out of $8.37, it’s also important to talk about the sustainability of dividends. I want to mention the fact that for the first half of FY2020, the company reported free cash flow of 6.4 billion CNY ($957.4 million). Even in the most challenging times, the Chinese oil company has managed to deliver positive FCF. I expect FCF to increase in the coming years. Dividends are therefore safe. Given the strong fundamentals, CNOOC is also on track for a capital expenditure of 80 billion yuan (mid-range of guidance) for the current year. Investments are likely to be higher for the coming year. This will translate into production growth and cash flow upside. CEO stock has declined by 38% in the last 12 months, pretty much in lockstep with oil’s gyrations. I believe that the worst is over for the sector and for the stock. Exposure can be considered at current levels of $93.70. Chevron Corporation (CVX) Source: tishomir / Shutterstock.com Chevron is another oil stock that has strong fundamentals, attractive valuations and an attractive dividend yield. CVX stock has also declined by 38% in the last year and stock upside is likely in addition to dividends. Currently, the stock pays an annual dividend of $5.16, which translates into a dividend yield of 7.28%. Chevron also has a strong balance sheet with a net debt ratio of 17%. In addition, the company has $30 billion in cash and equivalents. The liquidity buffer should help the company to ramp-up investments once oil trends higher and sustains at higher levels. 7 Airline Stocks to Buy on Pelosi Stimulus Hopes The company’s Permian asset is likely to deliver production growth and strong cash flows in the coming years. Even for FY2020, the company expects positive FCF from Permian assets. Therefore, once oil trends higher, the returns from Permian assets will be attractive. With strong fundamentals, quality assets and robust dividends, I expect CVX stock to be a value creator in the coming years. Equinor (EQNR) Source: II.studio / Shutterstock.com I believe that Norway’s Equinor is among the top oil stocks. In the last one year, EQNR stock has declined by 20.8%, outperforming CVX stock and CEO stock and even ETF USO. The stock also has a healthy 2.55% dividend yield. In terms of growth, I believe that the Johan Sverdrup asset is likely to be a game changer for the company. The asset is the third-largest in the Norwegian continental shelf with expected resources of 2.7 billion barrels of oil equivalent. Once phase two production commences in FY2022, daily production from the asset will be 690,000 BOE/day. The company has a 42.6% stake in the asset. The asset will therefore deliver production growth and cash flow upside in the coming years. FCF is likely to be robust considering the point that the company expects full field break-even as $20 per barrel. Of course, Johan is not the only asset. The company has 6 billion barrels of proved oil and gas reserves. With a robust credit rating, the company has financial flexibility for growth. Overall, EQNR stock is worth considering at current levels. In the next 12-24 months, the company can deliver robust returns through stock upside and dividends. Marathon Oil (MRO) Source: IgorGolovniov / Shutterstock.com Among the relatively smaller names in the industry, I like Marathon Oil. MRO stock has slumped by 63% in the last year, but has been sideways for the past six months. I believe that the worst is over and upside is likely in the coming quarters. It’s worth noting that the company recently reinstated dividends with a quarterly pay-out of 3 cents per share. An annual dividend of 12 cents implies a yield of 2.89%. From a fundamental perspective, Marathon reported total liquidity of $3.5 billion as of Q2 2020. In addition, the balance sheet remains strong with an investment grade credit rating. Low break-even assets are another reason to be bullish on the company. In the second half of the year, the company expects positive FCF even if WTI oil is around $30 per barrel. For the next year, free cash flow break-even is expected at $35 per barrel. 7 Airline Stocks to Buy on Pelosi Stimulus Hopes WTI oil currently trades at $40 per barrel and with likelihood of oil trending higher, the company’s dividends are safe. In addition, as FCF swells, fundamentals will further improve. Overall, MRO stock can be a potential doubler in the next 12-24 months. On the date of publication, Faisal Humayun did not have (either directly or indirectly) any positions in any of the securities mentioned in this article. Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector. As of this writing, Faisal Humayun did not hold a position in any of the aforementioned securities. More From InvestorPlace Why Everyone Is Investing in 5G All WRONG Top Stock Picker Reveals His Next 1,000% Winner Radical New Battery Could Dismantle Oil Markets Revolutionary Tech Behind 5G Rollout Is Being Pioneered By This 1 Company The post 4 Oil Stocks To Buy as the Price of Crude Stabilizes appeared first on InvestorPlace.