Despite all the negative chatter, and a recent backup in crude oil pricing, the worst is probably over. Oil has been range bound for over six months, and more and more analysts on Wall Street feel that while 2016 could be a slow grind higher, 2017 could see significantly higher pricing. While the days of $100 a barrel are probably gone for some time, barring some geopolitical event, prices should be solidly higher 18 months from now.
The question for many investors is whether to initiate positions or add to those that could be down, which is the best route to go. Most analysts and strategists agree that large-cap blue chip stocks that pay good dividends are the way to go. Not only should they survive due to their sheer size, they will throw off income while patient investors wait for prices to move higher.
We screened the Merrill Lynch energy stock universe and found four top companies rated Buy with solid dividends for investors to consider.
This may offer investors some of the best total return possibilities, and Merrill Lynch see it as a top yield play and recently added it to the firm’s US1 list. ConocoPhillips (NYSE: COP) is a large integrated that has spent the past five years divesting assets. Although it is cash rich, the company has somewhat dampened earnings and growth expectations all year long. Now, with oil looking for a bottom and the market watching events in the Middle East, many analysts may feel more comfortable with the stock.
Merrill Lynch feels Conoco can accelerate growth from reloaded portfolio depth in the Bakken and Eagle Ford with visibility on future growth from a newly disclosed sizable position in the Permian. The analyst is cautious but positive on the company’s earnings report, which will come this week. Solid cuts in unnecessary spending and the possibility of increased sales of non-core assets remain ongoing positives.
Investors receive a very strong 5.54% dividend. The Merrill Lynch price target for the stock is $77. The Thomson/First Call consensus price target is $62.38. Conoco ended Wednesday at $53.44 per share.