This time last year, the price of oil was plummeting as concerns about COVID-19 were rising. Travel came to a near halt, and there was a sense of paralysis in the country due to the pandemic and the ensuing lockdowns and restrictions. In fact, April 20, 2020, was the first day in history where oil recorded negative prices. U.S. oil benchmark West Texas Intermediate (WTI) crude fell from $17.85 a barrel at the start of the trading day to negative $37.63 by the close. Storage was full, and those stuck with futures contracts were crushed.
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What a difference a year makes. With April here and spring arriving across the country, WTI has rebounded to over $61 a barrel, while Brent crude is trading near $65. Recently oil sold off hard, and Goldman Sachs analysts think there is a solid opportunity for investors looking to buy the top stocks that also pay solid and dependable dividends. They said this about the sector:

We see 18% weighted average total return upside to our Oil and Gas coverage, assuming long-term Brent prices of $60 per barrel. We believe a positive earnings revision cycle is ahead for the group, despite recent oil price volatility. That said, investors that are more bearish point to four concerns. First, concern that near-term Europe demand weakness will weigh on crude prices, although we note we still see a sharp recovery in oil demand ahead. Second, concerns about being positive crude ahead of an OPEC+ meeting this week, although given the oil pullback most see a “1 month roll over” of cuts as likely. Third, valuation, although with the pullback most agree the stocks are no longer stretched. Lastly, terminal demand and ESG concerns, with many seeing our 2030 oil demand view of 106-107 million barrels per day as too high.

We screened the Goldman Sachs research universe looking for stocks rated Buy that pay big dividends. Shares of these three supermajor, integrated companies look like tremendous buys now. It is still important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Chevron

This energy giant is a solid way for more conservative investors looking to be positioned in the energy sector. Chevron Corp. (NYSE: CVX) is a U.S.-based integrated oil and gas company, with worldwide operations in exploration and production, refining and marketing, transportation and petrochemicals. The company sports a sizable dividend and has a solid place in the sector when it comes to natural gas and liquefied natural gas.

In December, the company gave some solid 2021 guidance, and the analysts are even more positive now:

While Chevron has faced a number of asset-level challenges recently, we continue to see strong free-cash-flow generation potential and after underperformance year-to-date, see attractive risk/reward at current levels. We have a positive view on

(1) The company’s balance sheet strength and commitment to capital discipline.
(2) Management’s balanced approach to the energy transition with a focus on reducing carbon intensity and increasing company returns.
(3) attractive leverage to a commodity price recovery.

Shareholders receive a 4.88% dividend, which the analysts feel comfortable will remain at current levels. The Goldman Sachs price target for the shares is $117, while the Wall Street consensus target is $118.82. Chevron stock closed trading most recently at $105.75 a share.

This is another large-cap company with a stock that offers strong value for investors. ConocoPhillips (NYSE: COP) explores for, produces, transports and markets crude oil, bitumen, natural gas, liquefied natural gas and natural gas liquids (NGLs) worldwide.
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Conoco’s portfolio includes resource-rich North American tight oil and oil sands assets; lower-risk legacy assets in North America, Europe, Asia and Australia; various international developments; and an inventory of conventional and unconventional exploration prospects.

Many Wall Street analysts feel Conoco can accelerate growth from a reloaded portfolio depth in the Bakken and Eagle Ford, with visibility on future growth from a sizable position in the Permian. Goldman Sachs is very positive:

We see four key drivers of an attractive view on COP including:

(1) Leverage to an oil price recovery, particularly given the stock’s recent dislocation versus Brent prices, to which it has historically been highly correlated.
(2) Robust free cash flow generation, representing attractive capital returns potential.
(3) Asset quality accretion via the recently completed Concho transaction.
(4) Attractive valuation following underperformance versus peers. While we continue to get pushback around federal land exposure, we see positive catalyst opportunities via the company’s March guidance update, a potential buyback announcement, and an oil demand recovery.

Investors in ConocoPhillips stock receive a 3.18% dividend. Goldman Sachs has a $66 price target, and the consensus target is $62.73. Shares last closed at $54.02.

Exxon Mobil

The energy giant finally has been removed from the penalty box on Wall Street and offers investors an incredible entry point. Exxon Mobil Corp. (NYSE: XOM) is the world’s largest international integrated oil and gas company. It explores for and produces crude oil and natural gas in the United States, Canada, South America, Europe, Africa and elsewhere.

Exxon also manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and specialty products, and it transports and sells crude oil, natural gas and petroleum products.

The analysts said this:

Our positive view is predicated on leverage to positive macro tailwinds around higher oil prices and improving refining/chemicals margins, continued progress on cost reductions, as well as a commitment to capital discipline that we believe will drive lower break evens versus recent history. While Exxon has outperformed peers year-to-date, we continue to see potential positive catalysts in a positive consensus revision cycle as well as the company’s upcoming March analyst day.

The dividend yield is 6.23%, and it probably will continue to be defended. The $65 Goldman Sachs price target is higher than the $60.37 consensus target. The stock ended last week at $57.39 a share.

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These are all solid ways for investors to play the upswing in oil and an improving 2021 economy. Plus, as three integrated majors, they are stellar stocks for investors looking for a degree of safety and income, as well as exposure to a sector that still has good upside potential.

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