Analysts Are Boosting Price Targets On These Oil and gas Stocks. Is It Time

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The energy sector has been a standout performer in recent years, with many oil and gas companies delivering strong returns and generous dividends. Now, analysts are raising their price targets on some of the industry’s biggest names, suggesting that there may be further upside ahead. But with yields already at attractive levels, is it time for income investors to lock in these dividends at the current stock prices?

Let’s take a closer look at two oil and gas giants that have caught the attention of Wall Street analysts: Exxon Mobil Corp (NYSE:XOM) and Chevron Corp (NYSE:CVX).

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Exxon Mobil Corp: Analysts See Double-Digit Upside

Exxon Mobil, the largest U.S. oil company, has been on a tear lately. The company reported strong first-quarter 2024 earnings of $8.2 billion, driven by robust oil and gas production growth, particularly in the Permian Basin and Guyana. Exxon also announced a significant new oil discovery in Guyana, further bolstering its long-term growth prospects.

Analysts have taken notice of Exxon’s impressive performance and are raising their price targets accordingly. On April 30, 2024, Wells Fargo maintained an Overweight rating on the stock and raised its price target from $138 to $142, implying a 19.46% upside from current levels. TD Cowen also maintained a Buy rating and increased its target from $128 to $135, suggesting a 13.57% potential return.

Exxon currently offers a dividend yield of 3.18%, with an annual dividend rate of $3.80 per share. The company has increased its dividend for 25 consecutive years, earning it the coveted title of a Dividend Aristocrat. Over the past decade, Exxon has grown its dividend at a compound annual growth rate (CAGR) of 3.97%, outpacing the sector median of 1.28%.

Chevron Corp: Analysts Predict Nearly 30% Return Potential

Not to be outdone, Chevron also delivered impressive first-quarter results. The company reported earnings of $5.5 billion, with worldwide production up 12% from a year ago. Chevron returned $6 billion to shareholders through dividends and share repurchases, marking the eighth straight quarter of returns exceeding $5 billion.

Analysts are bullish on Chevron’s prospects, with Wells Fargo maintaining an Overweight rating and raising its price target from $198 to $206 on April 30, 2024, implying a substantial 26.22% upside. HSBC also maintained a Buy rating and increased its target from $175 to $178, suggesting a more modest 9.06% return.

Chevron boasts an even higher dividend yield than Exxon at 3.92%, with an annual dividend rate of $6.52 per share. The company has an impressive 36-year streak of consecutive dividend increases and has grown its payout at a 4.41% CAGR over the past 10 years, well above the sector median.

Check out: Passive income investments are one of the most trusted methods for riding out a recession, so it’s no surprise that people are turning to high-yield real estate notes that pay a fixed 7.5% to 9%.

To Lock In Or Not To Lock In?

While the consistent dividend growth and attractive yields of Exxon and Chevron may tempt income investors to lock in these dividends at the current stock prices, it’s important to remember that even the best analysts are only right slightly more than half the time. The decision to invest in these oil and gas giants ultimately depends on how well they align with an individual investor’s long-term strategy and risk tolerance.

Alternative Passive Income Plays

For investors seeking to diversify their income streams beyond traditional dividend stocks, there are some compelling options in the real estate sector:

1. EquityMultiple’s Ascent Income Fund: This fund aims to provide investors with diversified exposure to U.S. commercial real estate loans, targeting a net return of 11-13%. With a focus on first lien debt investments across various geographies, property types, and borrowers, the fund seeks to mitigate risk while delivering stable returns. Investors can benefit from quarterly income distributions or choose to reinvest dividends for compounding returns.

2. Cityfunds Yield Fund: The Cityfunds Yield Fund offers investors an 8% target annual percentage yield (APY) by investing in a diversified pool of collateralized real estate loans. With a guaranteed minimum APY of 7%, this fund provides an attractive option for income-focused investors seeking exposure to the real estate debt market.

The Bottom Line

While the recent analyst upgrades and attractive dividends of Exxon Mobil and Chevron are certainly enticing, income investors should carefully consider their individual goals and risk profiles before making any investment decisions. For those seeking to diversify beyond traditional dividend stocks, real estate investment opportunities like EquityMultiple’s Ascent Income Fund and the Cityfunds Yield Fund offer compelling alternatives for generating passive income.

As always, thorough due diligence and a long-term perspective are essential when navigating the ever-changing landscape of income investing. By staying informed and open to new opportunities, investors can build resilient portfolios that weather market fluctuations and deliver reliable returns for years to come.