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Top Value Stocks with Amazing Dividend Yields

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·5 min read
In this article:
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  • (1:00) - Breaking Down The Energy Sector: Strong Value Stocks That Pay Dividends

  • (7:15) - Tracey’s Top Stock Picks

  • (25:45) - Episode Roundup: DVN, PXD, CTRA, FANG, EOG, COP

  • Podcast@Zacks.com


Welcome to Episode #284 of the Value Investor Podcast.

Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.

Value stocks are back in vogue in 2022 but so are dividend stocks. What if you could buy a cheap stock that was yielding above 5% and also had rising earnings estimates?

Too good to be true?

Not if you know where to look.

Energy Companies to See Record Earnings and Free Cash Flows Again in Q2

Energy companies were already paying juicy dividends earlier this year. Many are paying a base dividend, special or variable dividends, and they’re buying back shares because they consider them to be cheap.

Combining all three shareholder friendly actions can result in yields above 8%.

With crude and natural gas at new decade highs heading into the summer, free cash flows should remain elevated in the near term.

Beware: You Can’t Screen for High Dividend Yields Right Now

Because so many companies are paying special dividends, the yields on many energy companies are, frankly, messed up on most financial sites. They are under-reporting the true yield.

You have to actually dig into the dividend announcements by the companies.

That’s a lot of work, so Tracey has done it for you so you don’t have to.

5 High Yield (Over 5%) Cheap Energy Stocks

1.       Devon Energy DVN

Devon Energy drills in the Delaware Basin. With a market cap of $51 billion, it posted record free cash flow in the first quarter.

Devon Energy is paying a fixed plus variable dividend which was $1.27 in the first quarter, payable to shareholders of record as of June 13 on June 30.

YahooFinance says Devon Energy is yielding 6.6% but it’s also doing a huge share repurchase program which it raised by 25% to $2 billion in the first quarter.

Devon Energy trades at just 8.9x.

Should Devon be on your wish list even as it is making new 52-week highs?

2.       Pioneer Natural Resources PXD

Pioneer Natural Resources drills in the Permian Basin and has one of the best balance sheets in the industry. In the first quarter it returned 88% of free cash flow to shareholders though a base dividend, a variable dividend and a share repurchase program.

The quarterly and variable dividend in Q1 was $7.38, which at that time was an annualized yield of 13%, the highest in the S&P 500.

Pioneer Natural Resources shares are at new highs, up 56% year-to-date. But they’re still cheap with a forward P/E of 8.4.

Should you be diving into Pioneer for that huge dividend?

3.       Coterra Energy CTRA

Coterra Energy was formed in 2021when Cabot Oil & Gas and Cimarex Energy merged. It drills in the Delaware Basin, in the Anadarko Basin in Oklahoma and the Marcellus shale in the Appalachian Basin where it drills 100% natural gas.

In the first quarter, Coterra Energy paid out 69% of its free cash flow back to shareholders.

That included a $0.15 base dividend, a $0.45 variable dividend and starting to execute on its $1.25 billion share repurchase plan.

Shares are up 87% year-to-date but still trade with a forward P/E of just 8.7.

Is Coterra Energy the hidden gem of the group, especially with natural gas prices soaring?

4.       Diamondback Energy FANG

Diamondback Energy drills in the Permian and announced on May 16, 2022 that it was acquiring Rattler Midstream.

In the first quarter, Diamondback Energy raised its base dividend by 17% to $0.70 per quarter, or $2.80 annualized. That’s a yield of 1.8%. But that’s not all.

In the quarter, it announced a variable dividend of $2.35 which combined with the base was yielding 9.7% as of May 2.

It’s also repurchasing shares.

Should investors be buying Diamondback exclusively for its big dividend?

5.       EOG Resources EOG

EOG Resources is one of the big drillers with a market cap of $85.6 billion. It has pledged to return a minimum of 60% of its free cash flow to shareholders.

In the first quarter it paid a regular dividend of $0.75 and a special dividend of $1.80. The regular dividend, which is $3.00 annualized, was up 86% from the 2021 regular dividend of $1.61.

The special dividend of $1.80 is payable on June 30 to shareholders of record as of June 15, 2022.

With WTI remaining over $100 for most of the second quarter, should income investors be jumping into EOG Resources?

What Else do you Need to Know About Finding Cheap Energy Stocks with Big Yields?   

Tune into this week’s podcast to find out.

[In full disclosure, Tracey owns shares of PXD in her personal portfolio.]

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Devon Energy Corporation (DVN) : Free Stock Analysis Report
Pioneer Natural Resources Company (PXD) : Free Stock Analysis Report
EOG Resources, Inc. (EOG) : Free Stock Analysis Report
Diamondback Energy, Inc. (FANG) : Free Stock Analysis Report
Coterra Energy Inc. (CTRA) : Free Stock Analysis Report
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