The energy sector ended the second quarter with 3.75% in dividend yields, the highest dividend yields of any sector in the S&P 500, according to S&P Global.

Real Estate was a close second at 3.69%. Overall, S&P yields were 1.55%.

High dividends and stock buybacks have been part of energy companies’ strategy to return cash to investors. The energy sector has also led the S&P 500 in combined yields of dividends and stock buybacks.

S&P Dow Jones Indices senior index analyst Howard Silverblatt compiled the numbers and believes energy payouts, which remain volatile due to the underlying oil supply and demand issues, are under pressure.

“The downturn in global economies has impacted demand, even as producers have attempted to reduce and control supply, resulting in stagnate prices. Given the probability of limited demand growth and a potential recession, second half dividends may be limited by the forward profit and margin outlook,” Silverblatt told Hart Energy. “The sector, however, still more than pulls its weight, as it accounts for 7.5% of the earnings, even as it makes up only 4.1% of the market. Q2 2023 sales appear to have improved, with an 8.8% increase from Q1, but remain 17.2% off the recent Q2 2022 high. Margins are expected to continue to decline, down for the fourth consecutive quarter, to 9.1% from Q2 2022’s 11.6%.”

With capital already tight for energy, some fear an additional flight of capital as tech stocks are even more attractive with investors seeing a likely AI boom. But Subash Chandra, an energy analyst at Benchmark, said the energy industry is playing its hand the best it can.

“Free cash flow and return-of-capital is central to maintaining investor interest. It should prevent boom-bust cycles and reward stockholders through the cycle,” he said. “There’s not much anyone can do when tech is hot. Materials stocks can’t gain the multiples of high-concept tech names.”