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Oil Could Blow Through $100 by October: 7 'Strong Buy' Analyst Favorites That Pay Big Dividends
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Since topping out at $120 a barrel back in the summer of 2022, the major oil benchmarks traded down every month until bottoming last December. The decline from the top in June of 2022 was a staggering 40%, and while the oil majors can still make money at that level, with a declining price many opted to slow or halt production. By March of this year, West Texas Intermediate had dropped to $67.61, a bottom that stayed in place until late June when oil finally broke out.
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OPEC announced recently that its production levels will stay in place going forward, and Saudi Arabia has extended its million-barrel-per-day production cuts through the end of the year. In addition, with Russia cutting oil exports by 300 million barrels, the perfect storm was in place for a move higher.
We screened our 24/7 Wall St. energy research universe looking for stocks that are rated Buy, come with large and dependable dividends, and have solid upside to the posted price targets. Seven top companies came up, and all make sense for growth and income investors looking to add energy. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Chevron
This integrated giant is a safer way for investors looking to get positioned in the energy sector, and shares have backed up some. Chevron Corp. (NYSE: CVX) engages in integrated energy and chemicals operations worldwide. The company operates in the following two segments.
The Upstream segment is involved in the exploration, development, production and transportation of crude oil and natural gas; processing, liquefaction, transportation and regasification associated with liquefied natural gas; transportation of crude oil through pipelines; and transportation, storage and marketing of natural gas, as well as operating a gas-to-liquids plant.
The Downstream segment engages in refining crude oil into petroleum products; marketing crude oil, refined products and lubricants; manufacturing and marketing of renewable fuels; transporting crude oil and refined products by pipeline, marine vessel, motor equipment and rail car; and manufacturing and marketing of commodity petrochemicals, plastics for industrial uses and fuel and lubricant additives. It is also involved in cash management and debt financing activities; insurance operations; real estate activities; and technology businesses.
Chevron posted strong second-quarter results and has a solid place in the sector when it comes to natural gas and liquefied natural gas (LNG). It remains one of the best ways to play energy safely.
The company sports a 3.66% dividend. Mizuho has a $215 target price on Chevron stock. The consensus target is $187.46, and the shares closed on Friday at $166.28.
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 natural gas liquids (NGLs) in the United States and Canada.
The company 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.
Shareholders receive a 7.43% dividend. Stifel’s $79 target price is a Wall Street high. Devon Energy stock has a consensus target of $60.24. The shares closed at $46.59 on Friday.
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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.
The company owns, operates, develops and acquires midstream infrastructure assets, including 770 miles of crude oil gathering pipelines, natural gas gathering pipelines and an integrated water system in the Midland and Delaware Basins.
Investors receive a 4.55% dividend, but being of the variable variety it could change depending on production and profits. The target price at Mizuho is $197, above the $174.89 consensus target. Diamondback Energy stock closed on Friday at $150.57.
Energy Transfer
The top MLP is a safer play 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.
The company is a publicly traded limited partnership with core operations that include complimentary natural gas midstream, intrastate and interstate transportation and storage assets; crude oil, natural gas liquid (NGL) and refined product transportation and terminaling assets; NGL fractionation; and various acquisition and marketing assets.
After the purchase of Enable Partners in December of 2021, Energy Transfer 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.
Energy Transfer stock comes with a 9.04% distribution. The $17 Morgan Stanley price target compares with a consensus target of $17.29 and Friday’s $13.82 closing share price.
24/7 Wall St.Enterprise Products Partners
This is the largest publicly traded energy partnership and a leading North American provider of midstream energy services to producers and consumers. Enterprise Products Partners L.P. (NYSE: EPD) provides a wide variety of midstream energy services, including gathering, processing, transportation and storage of natural gas, NGL fractionation, import and export terminaling, and offshore production platform services.
One reason many analysts may have a liking for Enterprise Products Partners stock might be its distribution coverage ratio. This ratio is well above 1 times, making it relatively less risky among the MLPs.
The distribution yield here is 7.34%. Enterprise Products Partners stock has a $33 price target at J.P. Morgan. The consensus target is $32.06, and shares closed on Friday at $27.39.
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Exxon Mobil
This mega-cap energy leader trades at a reasonable valuation and still offers investors an excellent 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.
Top Wall Street analysts expect Exxon to remain a key beneficiary in this higher oil price environment, and most remain strongly positive about the company’s sharp positive inflection in capital allocation strategy, upstream portfolio, and leverage to a further demand recovery, with Exxon Mobil offering greater downstream/chemicals exposure relative to peers.
The record second-quarter profit that was more than double from a year ago and topped Wall Street estimates, as rising oil and gas output overcame a pullback in energy prices from high levels.
Shareholders receive a 3.17% dividend. UBS has set its price target at $139, well above the consensus target of $123.62. On Friday, Exxon Mobil stock closed at $114.94.
24/7 Wall St.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.
Investors receive a 7.39% dividend, which, again, is variable. The Piper Sandler target price on Pioneer Natural Resources stock is $332. The consensus target is much lower at $261.54, and shares were last seen trading at $223.07.
The reality for investors and consumers is that OPEC and the Saudis have made it painfully clear they are going to support oil prices by cutting production. Any attempts to further dip into the Strategic Petroleum Reserve, after already taking it to the lowest levels in over 40 years, will likely prove to be very unpopular and will do little to mitigate prices.
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