While the energy sector has outperformed this year, with the State Street Energy Select Sector SPDR ETF (XLE) gaining 45% compared to the S&P 500’s 13% increase, Goldman Sachs maintains that compelling dividend-paying opportunities remain. Brent crude futures closing above $95 per barrel, driven by Middle East conflict concerns, has intensified investor focus on value-oriented energy selections. Goldman’s analyst Neil Mehta highlighted a valuation-focused screening process that identifies Buy-rated stocks offering above-average total returns while trading at below-average 2028 earnings multiples. Four companies have emerged from this analysis as particularly attractive: Devon Energy, Expand Energy, HF Sinclair, and ConocoPhillips. Devon Energy has risen approximately 33% this year, yet Mehta describes it as “a compelling valuation opportunity” given its 14% free cash flow yield based on average 2027/2028 estimates. The company’s strategic focus on the Delaware Basin asset, combined with its commitment to return up to 70% of free cash flow to shareholders through dividends, supports this position. Following its May dividend increase and strong second-quarter earnings and revenue performance, Devon Energy presents a $55 price target representing 12% upside from recent closes.Expand Energy, another gas exploration and production company, trades at a 10% free cash flow yield relative to its Appalachian peers, who average 8%. With a reliable free cash flow stream and consistent capital return program, the company offers a 2.3% dividend yield. Management’s confidence in sustainable cash flow improvement through enhanced marketing and commercial strategies complements its mixed second-quarter performance, where earnings exceeded expectations while revenue fell short. Despite being down roughly 10% in 2026, the stock maintains appeal. HF Sinclair has surged 131% year to date, yet Mehta identifies valuation discounts due to uncertainty surrounding interim leadership in both CEO and CFO transitions. The firm’s non-refining segments—including Lubricants, Renewable Diesel, and Midstream operations—combined with its presence in niche refining markets (West Coast/Rockies and Mid-Continent), provide additional value. Following second-quarter beats on both top and bottom lines and a dividend increase, the stock currently yields 2% with a $114 price target implying 7.5% upside. Finally, ConocoPhillips presents a $146 price target suggesting over 6% appreciation potential. Goldman’s Buy rating stems from anticipated $7 billion free cash flow growth by 2029, driven by four major growth projects coming online and $1 billion in cost reductions, despite current discounted trading reflecting the company’s ongoing capital cycle phase.
