Oil Could Explode Higher With Increasing Chinese Demand: 5 'Strong Buy' Stocks With Huge Dividends

imaginima / E+ via Getty Images

The major oil benchmarks have traded in a tight range this year, and one reason it has had a hard time breaking out to the upside is worries over demand from China. However, there were some indications last week that China may be getting ready to jumpstart its economy, as the government eased monetary policy and boosted import quotas for the country’s refineries. Top analysts feel that these two moves, and others that may be on the way, could boost prices in a big way as summer rolls on.

We screened our 24/7 Wall St. energy research database looking for top exploration and production stocks, and one master limited partnership (MLP), that have among the biggest dividends and are Buy rated across Wall Street. Five top companies fit the bill perfectly and make sense for growth and income investors looking to initiate or add to energy holdings.

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.

Investors receive an 8.33% variable dividend. Mizuho has a $39 target price on Coterra Energy stock. The consensus target is $30.43, and shares were last seen on Friday trading at $25.13 apiece.

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 Energy 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 MLP EnLink.

Shareholders receive a 9.06% dividend. Truist Financial’s $81 target price is well above the $62.08 consensus target. Devon Energy stock closed on Friday at $49.80.

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 also 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 of the Permian Basin.

Diamondback Energy stock comes with a 7.17% dividend, which is also of the variable variety. That means it could change depending on production and profits. A $190 target price accompanies the Strong Buy rating at Raymond James. The consensus target is just $169.58, and Friday’s close was at $128.74.

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.

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, NGL and refined product transportation and terminalling assets; NGL fractionation; and various acquisition and marketing assets.

After the purchase of Enable Partners in December of 2021, 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.

Investors receive a 9.59% distribution. Morgan Stanley has set a $17 price target, and Energy Transfer stock has a $17.21 consensus target. The shares closed at $12.82 on Friday.

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.

Pioneer 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.

Various media sources have said the company may still be in ongoing discussion with Exxon Mobil for a possible purchase or merger.

The dividend yield here is 11.22%. Pioneer Natural Resources stock has a $315 target price at Piper Sandler. That is a Wall Street high. The consensus target is $251.41, and Friday’s close was at $206.80.

These five top companies are all based in the United States and pay among the highest dividends in the sector. It is also important to also remember that investors can sell covered calls on these stocks to increase the income potential. The best news is that all have backed way off their 52-week highs and are offering outstanding entry points.

Sponsored: Want to Retire Early? Here’s a Great First Step

Want retirement to come a few years earlier than you’d planned? Or are you ready to retire now, but want an extra set of eyes on your finances?

Now you can speak with up to 3 financial experts in your area for FREE. By simply clicking here you can begin to match with financial professionals who can help you build your plan to retire early. And the best part? The first conversation with them is free.

Click here to match with up to 3 financial pros who would be excited to help you make financial decisions.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.