Goldman Sachs has identified several dividend-paying energy stocks that present compelling investment opportunities despite the sector’s strong performance this year. Analysts are focusing on companies offering above-average total returns with below-average forward multiples.
Key recommendations include Devon Energy (DVN), Expand Energy, HF Sinclair (HFC), and ConocoPhillips, each offering attractive valuations, dividend yields, and potential for future cash flow growth.
Despite a strong year for energy stocks, Goldman Sachs analysts see continued opportunities in dividend-paying energy companies, particularly for investors looking for value. The energy sector has significantly outperformed the broader market in 2026, with the State Street Energy Select Sector SPDR ETF (XLE) up 45% year-to-date, compared to the S&P 500's 13% gain. This surge is largely attributed to the rise in oil prices, exacerbated by geopolitical tensions in the Middle East, with Brent crude futures surpassing $95 per barrel.
Goldman Sachs analyst Neil Mehta highlighted in a recent note that the firm is applying a "valuation overlay" to identify promising opportunities within its oil and gas coverage. "For those screening for value, we screen our comparison sheets and identify Buy-rated stocks that currently offer above-average total return while trading at below-average 2028 multiples as investors position into year-end," Mehta stated.
Featured Energy Stock Picks:
- Devon Energy (DVN): With a 33% gain this year, Devon Energy is described as a "compelling valuation opportunity." Mehta notes its attractive 14% free cash flow yield based on 2027/2028 estimates and praises its development strategy, particularly its focus on the Delaware Basin. The company's commitment to returning up to 70% of free cash flow to shareholders, coupled with a recent dividend hike and strong second-quarter earnings, supports this positive outlook. Goldman Sachs has set a $55 price target, implying 12% upside, and the stock offers a 2.3% dividend yield.
- Expand Energy: This gas exploration and production company is also highlighted for its compelling valuation relative to its peers. Mehta projects a 10% free cash flow yield on average 2027/2028 estimates, outperforming the peer average of 8%. Expand Energy, which offers a 2.3% yield, is recognized for its reliable free cash flow and steady capital return program. The company is also expected to generate sustainable cash flow improvements through commercial initiatives. Despite mixed second-quarter results, its shares are down approximately 10% in 2026, presenting a potential entry point.
- HF Sinclair (HFC): While the U.S. refiner has seen a remarkable 131% rally year-to-date, Mehta believes it still trades at a discount due to interim leadership transitions for its CEO and CFO roles. Goldman Sachs sees value in the company's non-refining segments, including lubricants, renewable diesel, and midstream operations, as well as its leverage to niche refining markets. HF Sinclair reported strong second-quarter results and increased its quarterly dividend. The stock currently yields about 2%, and Mehta's $114 price target suggests an additional 7.5% upside.
- ConocoPhillips: The oil major, which has gained 45% year-to-date and hit a 52-week high, is favored by Goldman Sachs for its projected $7 billion free cash flow inflection by 2029, driven by four major growth projects and cost-saving initiatives. The stock is trading at a discounted multiple, reflecting market hesitation to price in future cash flow increases. With a 2.5% dividend yield and a $146 price target, ConocoPhillips offers over 6% potential upside.
Goldman Sachs' analysis suggests that even amidst a strong performance, select energy stocks continue to offer attractive value propositions for investors focused on dividends and long-term growth.
