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7 Energy Dividend Stocks Analysts Expect to Rally

Barchart - Mon Feb 12, 12:26PM CST

Oil stocks are in focus today, as yet another major merger takes shape in the critical Permian Basin region. Following high-profile Permian acquisitions last year by sector giants Exxon Mobil (XOM) and Chevron (CVX), investors are now responding to news of a $26 billion cash-and-stock bid for privately held Endeavor Energy Resources. 

As a result, energy stocks are diverging from oil prices to start the week; crude futures for March delivery (CLH24) are slightly lower at last check, while the sector-focused S&P 500 Energy Sector SPDR (XLE) is up more than 1%. Against this backdrop, here's a closer look at a selection of top-rated energy stocks that Wall Street analysts believe offer plenty of upside potential to complement their dividend yields.

Stock #1: Diamondback Energy

Diamondback Energy (FANG) is an independent oil and natural gas company that focuses on acquiring, developing, exploring, and exploiting unconventional, onshore oil and natural gas reserves. The stock pays a quarterly dividend of $0.84 per share, yielding 2.21% at current levels.

Shares of FANG have popped more than 9% today on news of its proposed merger with Endeavor, but the stock still trades below its mean price target of $178.78 from Wall Street analysts. With FANG valued at $27.15 billion by market cap, the deal with Endeavor would create a combined company worth over $50 billion.

FANG is set to report earnings next week on Tuesday, Feb. 20. Analysts are looking for a profit of $4.79 per share, down more than 9% year-over-year.

The consensus rating on FANG is a “strong buy,” with 20 out of 24 analysts giving the stock their highest recommendation. One more calls it a “moderate buy,” two suggest “hold,” and one recommends “sell.”

Stock #2: Devon Energy

Devon Energy (DVN) is involved in the exploration, development, and production of oil and natural gas (NGH24). Valued at $26.6 billion by market cap, the stock is down just over 6% year-to-date. DVN offers shareholders a quarterly dividend of $0.20 per share, which translates to a yield of 1.92%. 

When the energy company reports earnings on Feb. 27, analysts will be looking for EPS of $1.39, down 16% from the year-ago period. At about 7x forward earnings, DVN is priced at a discount to both its energy sector peers and its own five-year historical averages.

Overall, analysts are giving DVN a “moderate buy” rating. Out of 21 analysts, 11 are pounding the table with a “strong buy,” 1 is saying “moderate buy,” and 9 advise "hold." The average price target of $55.25 indicates about 30% upside potential from current levels.

Stock #3: Kinder Morgan

With a $36.92 billion market cap, Kinder Morgan (KMI) is a major pipeline and terminal operator in North America. The shares are off 4.9% in 2024.

KMI pays shareholders a dividend of $0.28 per share quarterly, which results in a forward yield of 6.80% at current levels.

In its latest earnings report on Jan. 17, KMI posted Q4 EPS of $0.28, which fell short of consensus estimates. For fiscal year 2024, analysts are expecting EPS to grow 9.35% to $1.17 per share. 

Overall, analysts rate KMI a “moderate buy” with a $20.50 price target, suggesting a 22.2% upside potential from current levels. Out of 18 analysts, 5 say “strong buy,” 1 recommends “moderate buy,” 11 advise a “hold," and 1 gives a “strong sell” rating.

Stock #4: Enbridge

Enbridge (ENB) is a major energy infrastructure player operating pipelines and utilities across North America. Down 3% so far in 2024, ENB has a market cap of $72.76 billion.

The company reported Q4 earnings last week that missed on both revenue and EPS, and offered an EBITDA forecast for 2024 that came in below consensus. The stock's forward price/earnings and price/sales valuations are now reflecting a discount to their respective five-year averages.

ENB stock yields a healthy 7.68% at current levels, based on the quarterly dividend payment of $0.65 per share.

Overall, analysts rate ENB as a “moderate buy.” The average price target of $40.31 indicates a potential upside of 15.5% from current levels. Out of 17 analysts covering the stock, 6 say “strong buy,” 3 recommend “moderate buy,” 6 suggest “hold,” and 2 give a “strong sell” rating.

Stock #5: Williams Companies

With a market cap of $41.39 billion, Williams Companies (WMB) owns and runs natural gas pipelines and processing plants. The stock is nearly flat in 2024, off just about 1.4% on a year-to-date basis.

However, the shares could move when WMB reports earnings this Wednesday, Feb. 14. Analysts are looking for EPS of $0.47, on average - an 11% drop from the same period last year.

Williams Companies stock pays a quarterly dividend of $0.48 per share. At current levels, that's a forward yield of 5.58%.

On average, analysts rate WMB a “moderate buy” with a $38.33 price target - suggesting about 11.6% upside potential. Out of 20 analysts, 7 say “strong buy,” 3 recommend “moderate buy,” and 10 say “hold.”

Stock #6: EOG Resources

EOG Resources (EOG) is a major player in crude oil and natural gas liquids production, valued at $64.75 billion by market cap. The stock has slipped 7.3% year-to-date.

Based on its quarterly dividend of $0.91 per share, EOG stock yields 3.28%. And at 9.41x forward earnings, the shares are reasonably priced at current levels, compared to its own historical averages.

EOG is due to report Q4 2023 earnings on Thursday, Feb. 22, after the closing bell. The consensus analyst forecast calls for EPS of $3.19, a 3.3% drop from the same quarter last year. 

Overall, 24 analysts rate EOG a “moderate buy,” with 14 saying “strong buy” and 10 more recommending a “hold.” The average price target of $142.79 indicates around 27% upside potential from current levels.

Stock #7: GeoPark Holdings

At just $477 million by market cap, GeoPark Holdings Limited (GPRK) explores and produces oil and gas assets across Latin America. The stock has managed a gain of 1.6% on a year-to-date basis.

GPRK pays a quarterly dividend of $0.13 per share, which translates to a forward yield of 6.30% for investors.

After missing consensus estimates in its last earnings report, expectations are relatively low for GPRK's December quarter results in mid-March. Wall Street is looking for EPS of $0.74, down by nearly 18% year-over-year.

Although coverage is very light, the three analysts officially tracking GPRK have unanimously rated it a “strong buy.” The average price target of $14.00 indicates a hefty upside potential of more than 60% from current levels.

On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

Provided Content: Content provided by Barchart. The Globe and Mail was not involved, and material was not reviewed prior to publication.

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