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Bank Fears Could Make Oil Explode Higher and Buffett Is Buying: 5 Top Stocks With Huge Dividends
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The Silicon Valley Bank implosion had a huge effect on almost every stock in the financial sector, and the worries spilled over to other sectors as well. Those worries led to a big pullback in oil prices, as panicked traders sold oil futures and asked questions later. However, after a strong week last week, and a jump higher of 5% on Monday, many are speculating that the black gold could be set for a big run higher over the coming months.
While some of the most bullish banks have cut their oil price target for this year, a run higher could still happen, very possibly to the low to mid $90s by summer. Given the current spot price for Brent and West Texas Intermediate at $78.62 and $73.60, respectively, on Tuesday, hitting any levels $15 to $20 per barrel higher would be huge for investors.
One savvy investor who took advantage of the financial issues and the tumbling oil price was Warren Buffett. In early March, the famed investors added an additional 5.8 million shares of Occidental Petroleum at prices ranging between $59.85 to $61.90. He bought 8 million more between March 23 and March 27. It was reported Tuesday that he added an additional 3.7 million shares this week. The Oracle of Omaha now owns a stunning 211 million shares, which is about a 23.5% stake in the company.
We screened our 24/7 Wall St. energy research database looking for stocks with the highest dividends and those rated Buy across Wall Street. Five top stocks made the cut, and all look like tempting buys now for investors looking to add or increase energy exposure. Note that four of these exploration and production energy leaders use a variable dividend strategy based on production and oil pricing, so current yields may be higher or lower as the year goes on. Yet, even if some come in lower, they should still be outstanding.
It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Coterra Energy
This company was formed by the closing of the $17 billion merger of Cabot Oil & Gas and Cimarex Energy in 2021. Coterra Energy Inc. (NASDAQ: CTRA) is an independent oil and gas company engaged in the development, exploration and production of oil, natural gas and natural gas liquids (NGLs) in the United States. It primarily focuses on the Marcellus Shale, with approximately 177,000 net acres in the dry gas window of the play located in Susquehanna County, Pennsylvania.
The company also holds Permian Basin properties with approximately 306,000 net acres and Anadarko Basin properties located in Oklahoma with approximately 182,000 net acres. In addition, it operates natural gas and saltwater disposal gathering systems in Texas. The company sells its natural gas to industrial customers, local distribution companies, oil and gas marketers, major energy companies, pipeline companies and power-generation facilities.
Shareholders receive an 8.63% variable dividend. Goldman Sachs has a $30 target price on Coterra Energy stock. The consensus target is $30.38, and the shares closed on Tuesday at $23.98.
24/7 Wall St.Devon Energy
This may be one of the best value propositions in the sector, and it was one of the first to utilize a variable dividend strategy. Devon Energy Corp. (NYSE: DVN) is an independent energy company that primarily engages in the exploration, development and production of oil, natural gas and NGLs in the United States and Canada.
Devon operates approximately 19,000 wells and also offers midstream energy services, including gathering, transmission, processing, fractionation and marketing to producers of natural gas, NGLs, crude oil and condensate through its natural gas pipelines, plants and treatment facilities.
Production is weighted toward crude oil while growth opportunities are liquids focused, anchored by the Delaware Basin, SCOOP/STACK, Eagle Ford Shale, Canadian Oil Sands, and the Barnett. Devon also owns equity in the publicly traded midstream master limited partnership (MLP) EnLink.
Investors receive a 10.52% dividend. Piper Sandler’s $85 target price is well above the $67.42 consensus target for Devon Energy stock, as well as Tuesday’s closing share price of $48.57.
Diamondback Energy
This red-hot energy play looks poised to press higher again. Diamondback Energy Inc. (NASDAQ: FANG) is an independent oil and natural gas company focused on the acquisition, development, exploration and exploitation of unconventional and onshore oil and natural gas reserves in the Permian Basin in West Texas and New Mexico.
Diamondback Energy primarily focuses on the development of the Spraberry and Wolfcamp formations of the Midland basin, as well as the Wolfcamp and Bone Spring formations of the Delaware basin, which are part of the Permian Basin. As of December 31, 2021, the company’s total acreage position was approximately 524,700 gross acres in the Permian Basin, and estimated proved oil and natural gas reserves were 1,788,991 thousand barrels of crude oil equivalent.
The company also holds working interests in 5,289 gross producing wells, as well as royalty interests in 6,455 additional wells. In addition, the company owns mineral interests in approximately 930,871 gross acres and 27,027 net royalty acres in the Permian Basin and Eagle Ford Shale, and it owns, operates, develops and acquires midstream infrastructure assets, including 866 miles of crude oil gathering pipelines, natural gas gathering pipelines, and an integrated water system in the Midland and Delaware Basins of the Permian Basin.
Diamondback Energy stock comes with an 8.80% dividend. The Barclays target price is $182, while the consensus target is $174.86. Tuesday’s close was at $130.51.
24/7 Wall St.Energy Transfer
This top MLP is a very safe way for investors looking for energy exposure and income. Energy Transfer L.P. (NYSE: ET) owns and operates one of the largest and most diversified portfolios of energy assets in the United States, with a strategic footprint in all the major domestic production basins.
Energy Transfer is a publicly traded limited partnership with core operations that include complimentary natural gas midstream, intrastate and interstate transportation and storage assets; crude oil, NGL and refined product transportation and terminaling assets; NGL fractionation; and various acquisition and marketing assets.
After the purchase of Enable Partners last December, Energy Transfer now owns and operates more than 114,000 miles of pipelines and related assets in all the major U.S. producing regions and markets across 41 states, further solidifying its leadership position in the midstream sector.
Through its ownership of Energy Transfer Operating (formerly known as Energy Transfer Partners), the company also owns Lake Charles LNG, as well as the general partner interests, the incentive distribution rights and 28.5 million common units of Sunoco and the general partner interests, and 39.7 million common units of USA Compression Partners.
The distribution yield is 10.45%. Morgan Stanley has set its price target at $19. The consensus target is lower at $16.75, and Energy Transfer stock closed at $12.05 on Tuesday.
Pioneer Natural Resources
Many Wall Street analysts love this stock as a pure crude oil play, and the company also employs a variable dividend strategy. Pioneer Natural Resources Co. (NYSE: PXD) operates as an independent oil and gas exploration and production company in the United States.
The company explores for, develops and produces oil, NGLs and natural gas. It has operations in the Midland Basin in West Texas. As of December 31, 2021, the company had proved undeveloped reserves and proved developed non-producing reserves of 130 million barrels of oil, 92 million barrels of NGLs and 462 billion cubic feet of gas, and it owned interests in 11 gas processing plants.
Its production services are supported by 100 well-servicing rigs, more than 100 cased-hole, open-hole and offshore wireline units, and a range of advanced coiled tubing units.
The company is a huge player in the Permian basin and the Eagle Ford in Texas, and it owns more than 20,000 locations in the world’s second-largest oil reservoir in the Midland Basin. With a stellar balance sheet, the company is poised to remain a top player in the Permian, as it expects to deliver solid production growth going forward.
Pioneer Natural Resources stock investors receive a 14.01% dividend, which again could be lower this year and may vary from quarter to quarter. The $322 Piper Sandler target price towers over the $256.92 consensus target and Tuesday’s close at $197.77.
These four top exploration and production leaders and a high-yielding energy master limited partnership offer investors very tempting entry points. Again, it is important to emphasize the variable dividend arrangements these companies use could provide higher or lower dividends, depending on production volume and per-barrel pricing. With that in mind, all are priced very reasonably now and could offer serious upside with a move higher in benchmark pricing in 2023.
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