Oil and gas stocks can produce significant capital gains from share price appreciation and attractive dividend income during periods of high oil and gas prices. As crude oil prices rise, oil companies tend to generate gushers of cash. That gives them more money to drill additional wells to increase their oil and gas production, repay debt, repurchase stock, and pay dividends, all of which can create value for shareholders. Of note, dividend payments in the sector tend to be higher than average because of the amount of cash oil companies can generate during good times. That often makes the sector attractive to investors seeking high dividend yields.

Because of the industry’s upside potential during periods of economic growth, oil and gas stocks can be smart investments if timed right. While The Motley Fool does not advocate for attempting to time the market, oil and gas investments made just as the economy transitions from a recession to an expansion can turn out to be wise moves.