Analysts flag three energy dividends ahead of earnings

Dividend stocks are getting a closer look as earnings reports, questions about AI spending and geopolitical risk keep markets choppy. For everyday investors, the key issue is whether a company can keep funding cash payments while still spending enough to run and grow the business.

A dividend is a cash payment to shareholders, while dividend yield compares that annual payment with the stock price. TipRanks, which ranks analysts based on their past performance, highlighted three energy names where Wall Street analysts see income backed by expected cash generation.

ConocoPhillips

ConocoPhillips, an oil and gas exploration and production company, pays a dividend of 84 cents a share, or $3.36 a share annually. TipRanks lists its dividend yield at 3%. The company is due to report second-quarter results on Aug. 6.

Wells Fargo analyst Sam Margolin kept a buy rating on ConocoPhillips and set a $183 price target, according to TipRanks. Margolin said lower oil prices tied to a higher OPEC production quota are a pressure point, but he still views ConocoPhillips and Shell as attractive before earnings because of their operational visibility and resilience.

Margolin expects ConocoPhillips to hit the midpoint of its production guidance at 2.2 million barrels of oil equivalent per day. Barrels of oil equivalent combine oil and gas output into one energy-based measure. He also expects weaker Waha natural gas prices in the Permian Basin to be balanced by stronger Brent crude premiums.

The analyst projects capital spending within ConocoPhillips’ prior annualized range of $12.2 billion, with no meaningful spending hit to the Northfield East project in Qatar despite disruption around the Strait of Hormuz. He estimates roughly $3.5 billion of free cash flow before working capital changes and earnings per share of $2.94. Free cash flow is the cash left after operating costs and capital investments.

TipRanks ranks Margolin No. 457 among more than 12,300 analysts, with profitable ratings 70% of the time and an average return of 13.3%.

Energy Transfer

Energy Transfer is a limited partnership with 140,000 miles of pipelines and related energy infrastructure. It pays a quarterly cash distribution of 33.75 cents per common unit, or $1.35 a year, giving it a 6.8% yield, according to TipRanks. Its second-quarter results are scheduled for Aug. 4.

Jefferies analyst Julien Dumoulin-Smith reiterated a buy rating and a $23 price target on Energy Transfer, TipRanks said. His adjusted EBITDA estimate is $4.46 billion, slightly below the Street consensus of $4.49 billion. EBITDA means earnings before interest, taxes, depreciation and amortization, a common measure of operating performance before financing and accounting costs.

Dumoulin-Smith said Energy Transfer has recently edged ahead of Enterprise Products Partners, while still trading at a 19% discount to that peer. He said the stock could be valued more highly if management gives investors a clearer long-term plan for natural gas growth.

The analyst expects adjusted EBITDA to grow at a 4.8% compound annual growth rate from 2027 through 2030, which he said is 1% to 3% above Wall Street expectations. TipRanks ranks Dumoulin-Smith No. 550 among more than 12,300 analysts, with profitable ratings 64% of the time and a 10.4% average return.

Chevron

Chevron is scheduled to release second-quarter results on July 31. The company paid a quarterly dividend of $1.78 a share last month, or $7.12 annualized, for a 3.92% yield, according to TipRanks.

Jefferies analyst Lloyd Byrne maintained a buy rating on Chevron but cut his price target to $216 from $236, TipRanks said. Byrne expects adjusted earnings per share of about $5.86, nearly 9% above Wall Street’s estimate.

Byrne said several first-quarter issues in Chevron’s upstream business, which covers oil and gas production, have largely cleared. Those included disruption at the Tengizchevroil joint venture in Kazakhstan, Storm Fern downtime and Middle East conflict. He expects second-quarter production of about 4,033 thousand barrels of oil equivalent per day and upstream adjusted earnings of about $8.1 billion.

For Chevron’s downstream business, which includes refining and related operations, Byrne projects adjusted earnings of about $4.4 billion. He also expects $18.2 billion in cash flow from operations before working capital changes, helped by stronger earnings and about $2.2 billion in dividends from affiliates. TipRanks ranks Byrne No. 409 among more than 12,300 analysts, with successful ratings 56% of the time and an average return of 17.5%.

This story draws on original reporting from CNBC.