For better or worse, great energy transitions take time. This worries some clean energy advocates for the future of the environment. And even forward-looking energy companies like TotalEnergies (NYSE: TTE) need to strike a balance between supporting older energy technologies, like gasoline engines, and building the infrastructure to support new ones, like electric vehicles (EVs). The good news for this French energy giant is that the former company is also proof new.
The big picture
When oil replaced coal as the world’s main source of energy, the transition took 100 years. It’s possible the transition to electric vehicles will happen faster than that, of course, but so far it doesn’t look like it will. Even under fairly generous assumptions, the US vehicle fleet could only be 45% electric by 2040, with a low estimate of less than 10% if EV adoption is reduced. So gasoline will still be needed for years and years to come.
This is great news for TotalEnergies, which is one of the largest integrated energy companies on the planet. But the company isn’t sticking its head in the sand and praying that electric vehicles will go away.
TotalEnergies invests massively in clean energies. A key part of this is building an electric vehicle charging fleet. This includes locations on highways, at corporate facilities, at traditional gas stations, and even service for individuals at their homes. In addition to this, TotalEnergies is also focused on expanding its footprint in power generation, as electric vehicles are expected to increase electricity demand.
As electric vehicles expand their grip, TotalEnergies plans to be there to help support demand.
What you get
But the big story here is really the overall business of TotalEnergies, which is still heavily geared towards oil and natural gas. Considering these are the primary sources of fuel today, that’s not a bad thing. Essentially, the company is using its cash cow operations to fund its own internal energy transition.
In addition, the company remained committed to the dividend. So, from Wednesday’s prices, you can see a hefty 5.4% dividend yield here as we wait for TotalEnergies to shift its business with the world. This is one of the highest returns of the major integrated peer group.
As it is a foreign company, you will have to pay French taxes on the dividends (you will be able to reclaim these taxes on April 15). And the actual value of the payment you receive will fluctuate with exchange rates. Yet with peers like BP and Shell choosing to reduce their dividends to support similar clean transitions, TotalEnergies stands out.
The most notable thing here, however, is that there won’t be a single winner in the electric vehicle space, just as there isn’t a single dominant name in the gasoline or gasoline market. the automobile. So there is plenty of room for TotalEnergies to build a strong business with its peers. It won’t happen overnight, but over time, TotalEnergies plans to become a major player in the field of electric vehicle charging.
Big transitions happen slowly
TotalEnergies probably won’t make ESG investors very happy, but the truth is, there’s no switch to flip as the world seems to be turning green. This will take time, as oil demand is expected to remain strong for decades.
However, TotalEnergies plans to use this to its advantage, making it an attractive energy stock likely to thrive both during the transition to electric vehicles and after.
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Reuben Gregg Brewer holds positions at TotalEnergies. The Motley Fool has no position in the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.