Goldman says buy these dividend-paying energy stocks with upside potential
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Energy stocks took a hit on Friday amid falling oil prices — and that could spell a buying opportunity for certain names favored by Goldman Sachs. Iran announced that the Strait of Hormuz was " completely open " earlier in the day, but President Donald Trump said the U.S. blockade was still active. Oil prices tumbled , with Brent crude futures dropping more than 8% and West Texas Intermediate futures sliding 10%. "We recognize there is significant geopolitical and commodity volatility, but these are ideas that we believe are fundamentally underpinned at our mid-cycle views," Goldman analyst Neil Mehta said in a note Monday of his list of buy-rated energy stocks. Several of the names he is bullish on also pay solid dividends. Mehta's list reflects four key themes, including a bullish long-term view of oil, assuming Brent crude will normalize at $75 per barrel. He also sees a more positive tilt on U.S. exploration and production companies in the United States given their valuation risk/reward. The analyst is also positive on the electrification theme and the further capital expenditures by utilities. Lastly, there are underappreciated idiosyncratic stories in some small cap stocks, where he sees an upward basis in the risk/reward skew for shares at current levels. Here are some of the dividend-paying companies that made the cut. Global oil company ConocoPhillips , which has a dividend yield of 2.76%, and oil services provider Halliburton , which yields 1.78%, are beneficiaries of Goldman Sachs' bullish long-term view of oil. ConocoPhillips also remains on Goldman's Americas Conviction List, which are stocks the firm believes are highly likely to outperform the market. As capital spending rolls off and major projects come online, shares should benefit from an inflection in free cash flow, Mehta said. Combine those projects with $1 billion in cost reductions, and ConocoPhillips should deliver a 20% to 25% free-cash-flow per share compound annual growth rate through 2030, he said. COP YTD mountain ConocoPhillips year to date His $144 price target implies 18% upside from Thursday's close. Meanwhile, Permian Resources is among those U.S. exploration and production companies that will win on execution, Mehta noted. The stock has a 3.13% dividend yield. "We maintain our confidence in PR's ability to capture incremental FCF [free cash flow] in periods of higher commodity pricing, as well as further progress in driving efficiencies and optimizing realizations across operations," he wrote. His $23 price target suggests the stock can rally 13% from Thursday's close. Electricity and power generation company Vistra , which yields 0.55%, hits Goldman's electrification theme. Mehta continues to see attractive fundamentals in its base business. "VST has most of its short-term generation hedged, which reduces earnings volatility in the short term and maintains upside to future power prices," he wrote. VST YTD mountain Vistra year to date The company's recent agreements with Meta Platforms to provide power to the tech giant is also constructive, he said. Mehta's $212 price target suggests 28% upside from Thursday's close. Lastly, Golar LNG Limited , a floating liquified natural gas infrastructure company, is one of the "underappreciated idiosyncratic, smaller cap stories" on Goldman's list. The stock has a 1.88% dividend yield. "We continue to see the company's business mix shift towards pure-play floating liquefaction business and clear near-term catalyst path as underappreciated by the market," Mehta said. His $60 price target implies 13% upside ahead.