- For the average person market, stocks offer an overwhelming array of data facts: there are almost 10,000 publicly traded companies , and more than 8,000 analysts who are professionals who work on Wall Street who build their careers by analyzing the many trendlines outlined by the indexes and stocks.
They Wall Street pros are the right people to turn to for advice on market trends as their research and views are easily accessible from major investment firms, or pulled out by journalists for video, print, as well as online. But are you able to trust their opinion? With numerous analysts to pick from how can you be sure that you’re hearing Wall Street’s most reliable analysts?
Luckily, the algorithms for data are a blessing. The data algorithms at TipRanks have separated the analysts according to a variety of variables, and ranked their ratings by overall. When we look at the most popular Wall Street analysts, we discover that one stock analyst, Vincent Lovaglio of Mizuho Securities, is standing over his competitors.
The highest rating is determined by a combination of his overall performance – currently 98% – as well as the average returns his suggestions have earned over the last year – which was a staggering 73 percent. It’s clear why Lovaglio is a standout.
We can now challenge him. Two of Lovaglio’s most recent stocks are high yield dividend payersthat provide investors an income stream that exceeds an average yield by a large margin. Are these the stocks to add to your portfolio? Let’s look at them more closely.
Devon Energy (DVN)
The first one of Lovaglio’s choices we’ll take a look at includes Devon Energy, a resident company that is part of that sector of oil and gas. It is headquartered within Oklahoma City, Devon is one of the biggest independent production and exploration companies for hydrocarbons in the US in the onshore sector. Devon operates in five states namely Montana, Colorado, Oklahoma, New Mexico, and Texas The company’s largest efforts are within the Delaware Basin on the Texas-New Mexico border. Devon’s operations are located in the top production areas.
Devon has significant resources for its development initiatives. Its market capitalization of $50 billion makes the company a strong base and has seen a boost in recent months from the significant inflation in the energy industry. Devon has seen significant growth in its profits and share price over the last twelve months.
With the earnings front, Devon brought in a net profit of $1 billion during the initial quarter the year. It was $1.88 per share diluted making it six consecutive quarters of gains in a row. Devon’s operating cash flow increased by 14% in the first quarter of this year and it generated a record-high $1.3 billion in cash flow. In light of all this there’s no reason to wonder why Devon’s shares have risen in a steady manner. Over the last 12 months, Devon’s share price has returned 165 percent.
Devon’s cash flow completely covered the capital requirements of the company and has also financed the record-setting stock buyback plan. This program has been raised to Devon’s Board by $2 billion roughly 25% of the remaining shares.
The cash flow of the company has provided a record-high dividend. In the first quarter of fiscal year, Devon declared a payment of $1.27 per common share. At an average annual rate of $5.08 that gives a dividend of 6.7 percent, which is more than three times the average dividend of S&P-listed companies. Devon has increased its dividends in the past five consecutive declarations.
Lovaglio mentions these issues in his analysis of Devon and the changes to share repurchases as well as dividend programs. He states “DVN managed to avoid raising capex throughout the year, despite the rising cost of living and a shortage of supplies (and it is sticking to its maintenance-focused plan). DVN closed this quarter having ~0.6x leverage, and could reach close to 0 strip by the year’s end. We believe that the US E&Ps are in a good position with double-digit cash returns at the strip, and are net beneficiaries of inflation driven by energy. DVN is not an exception.”
These comments confirm Lovaglio’s Buy rating and his price target of $89 suggests a potential upside of around 23 percent. In light of the dividend rate currently as well as the expectation of price increase, the stock is a the potential to earn a 29% total return profile. (To see the track record of Lovaglio’s, click here)
In the chart below, you can see the consensus breakdown, Devon has 6 Hold ratings. However, they are dominated by 14 Buys. Lastly, Devon has an overall score of Moderate. ( See DVN stock forecast on TipRanks)
Pioneer Natural (PXD)
The next stock we’ll examine the second one is Pioneer Natural Resources, another of the E&P companies that operate in on the Texas oilpatch. Pioneer is an production and exploration side of the oil industry and is able to earn profits directly from the production of oil on properties within the West Texas Permian Basin. It is the Permian is the formation of the earth that has placed Texas back on the global oil map over the last few decades and isn’t finished yet and drained. Pioneer is a major player in the region of oil patch which is the second-largest following Saudi Arabia. Many experts believe there is a chance that the Permian Basin could contain more hydrocarbon reserves than Saudi and Pioneer is in a good position to make gains in the coming years.
In reality Pioneer is already reaping the benefits. Pioneer’s shares are up 60 percent from the beginning of the year, and in the overall perspective of the past twelve month, PXD had gained ~87 percent. The gains in share prices have been accompanied by eight quarters of earnings growth that was sequential. In the 1Q22 report that was released recently, Pioneer showed a whopping $7.74 in earnings per dilutive share. The figure was based on a total net profit of $2 billion for non-GAAP metrics.
The strong earnings are getting back to shareholders. Pioneer distributes an annual quarterly dividend and typically will also pay a variable amount when it is possible. In the most recent announcement the base plus variable came at $7.38 for each share. The dividend payout totals an astounding yield of 10.5 percent, which gives PXD an actual yield that is higher than inflation.
Lovaglio observes that Pioneer has a positive production outlook because of its extensive portfolio of assets. He notes about PXD: “The company provides among the deepest unconventional inventories (20+ years of inventory economic at $40/bbl), which we believe will drive differentiation vs peers (with upper quartile oil and cash flow growth) longer term.”
Lovaglio is convinced that this outlook will help Pioneer for the foreseeable future. He recommends the stock with a Buy rating and the price target of $343. This suggests the possibility of an increase of around 23 percent this year.
In total the stock has 17 new analyst reviews for this stock, which includes five Holds and 12 Buys with a Moderate Buy consensus rating. ( See PXD stock analysis on TipRanks)
To get ideas for dividend stocks that trade at attractive prices, check out TipRanks’ Best Stocks to Buy new tool that brings together the entirety of TipRanks’ equity research.
Disclaimer The opinions stated within this piece are exclusively those of the analysts who are featured. This content is meant to be intended for informational use only. It is essential to conduct your own research prior to making any investment.