1 Energy Dividend Stock to Buy Now, According to JPMorgan

The energy sector remains a pivotal component of the global economy, and 2024 has already proven to be a remarkable year for oil and gas companies. Brent crude prices have stabilized between $74 and $90 per barrel, showcasing the industry’s resilience through prudent spending and efficient operations. By November 2024, oil and gas companies globally have distributed a remarkable $213 billion in dividends and executed $136 billion in share buybacks, underlining their commitment to rewarding shareholders.

ConocoPhillips (COP), a leading exploration and production company, has notably distinguished itself this year. In the third quarter of 2024, ConocoPhillips achieved record production levels in its Lower 48 operations—their largest business segment—resulting in total output of 1.917 million barrels of oil equivalent per day (MBOED). Despite facing lower-than-expected commodity prices, ConocoPhillips increased its quarterly dividend by 34% to $0.78 per share and augmented its share buyback program by $20 billion, aiming to return at least $9 billion to shareholders this year. JPMorgan has recently elevated ConocoPhillips to “Overweight,” predicting that it will be among the few exploration and production (E&P) companies capable of boosting cash distributions in 2025, thanks to its proactive $6 billion share buyback initiative and robust operational performance.

The Numbers Behind ConocoPhillips’ Success

As one of the largest oil and gas producers globally, ConocoPhillips focuses on extracting oil and natural gas from a mixture of low-cost, high-quality assets. Its operations span critical regions such as the Permian Basin, Eagle Ford, and Bakken in the U.S., along with substantial international projects. This strategic focus on efficiency and scale has solidified ConocoPhillips’ status as a leader in the energy field.

However, 2024 has been challenging for its stock. Year-to-date, the stock has declined by 11.2%, with volatility extending into November as it fell 9.16% to $115.38 before retreating to its current price of $102.95. Nonetheless, shares have shown signs of stability around the $101.29 support level, indicating a potential recovery. Financially, ConocoPhillips reported solid Q3 outcomes with $2.1 billion in earnings or $1.76 per share—down from last year’s $2.8 billion due to lackluster commodity prices. Adjusted earnings were $1.78 per share, supported by strong cash flows of $5.8 billion and record production levels of 1,917 MBOED. The firm’s Lower 48 operations reached an all-time high of 1,147 MBOED, reflecting its operational strengths.

ConocoPhillips trades at a forward P/E ratio of 13.1x, slightly above the sector average of 12.9x, yet justified by its robust earnings and growth potential. A price-to-earnings growth (PEG) ratio of 1.9x further positions it as an attractive choice for value and growth-seeking investors.

Key Growth Catalysts Powering ConocoPhillips

A recent highlight for ConocoPhillips is the successful acquisition of Marathon Oil, which has enhanced its portfolio with additional high-quality, low-cost assets. This acquisition is projected to generate over $1 billion in synergies within a year, elevating efficiency and cash flow. Additionally, ConocoPhillips invested $300 million to increase its stake in Alaska’s Kuparuk River and Prudhoe Bay units, solidifying its presence in a region noted for its dependable production capabilities. These strategic maneuvers not only expand ConocoPhillips’ resource base but also bolster its capacity to deliver substantial returns to shareholders over the long term.

Notably, ConocoPhillips prioritizes shareholder returns. In Q3 2024, the company distributed $2.1 billion to shareholders through dividends and buybacks due to its impressive cash flow.

What Analysts See Ahead for ConocoPhillips

Analysts foresee an optimistic outlook for ConocoPhillips, underpinned by solid financial prospects and strategic positioning. The company anticipates Q4 2024 production to range between 1.99 million and 2.03 million barrels of oil equivalent per day (MMBOED), with full-year production projected around 1.94 to 1.95 MMBOED. This steady increase reflects the impacts of recent acquisitions and investments expected to drive future growth in production and cash flows.

Predominantly, analysts express a strong bullish sentiment toward ConocoPhillips, with a consensus “Strong Buy” rating. Out of 25 analysts, 20 rated it a “Strong Buy,” one a “Moderate Buy,” and four a “Hold.” The average price target sits at $134.92, indicating a potential upside of approximately 30%. Following their assessment, JPMorgan elevated the stock’s status to “Overweight,” adjusting the price target from $120 to $123, reflecting confidence in ConocoPhillips’ ability to significantly increase cash distributions in 2025.

Institutional investors appear equally optimistic, with 82.36% of ConocoPhillips’ shares held by institutions, including significant stakeholders like Vanguard Group, BlackRock, and State Street. Notably, JPMorgan Chase increased its holdings by 6.5% last quarter, enhancing the company’s institutional faith and potential for future growth.

The Bottom Line on COP Stock

ConocoPhillips presents as a compelling energy dividend stock driven by strategic acquisitions, robust cash flow, and a steadfast commitment to shareholder returns. With a strong analyst consensus and JPMorgan forecasting increased cash distributions for 2025, COP blends growth potential with reliable income, making it an attractive prospect for investors seeking stability within a fluctuating sector.