Energy stocks, with their reputation for regular dividend payments and traditionally defensive nature, have long been the preferred place for investors seeking to shield their portfolios from broader volatility. This is especially true with the world on edge amid widespread geopolitical uncertainties, and as the lingering impact of inflation keeps the Federal Reserve stubbornly dedicated to its “higher for longer” stance.
With analysts at UBS calling for higher oil prices in the short term, and longer-term demand for energy projected to more than double by 2050, there's still plenty of appeal in the energy trade - both right now, and over the long haul.
That said, here are three mid-cap energy dividend stocks to consider, all with plenty of upside potential from current levels.
Energy Stock #1: Golar LNG
Founded in 1946, Golar LNG (GLNG) entered the liquefied natural gas (LNG) segment in 1970. Based out of Bermuda, Golar is a midstream floating solution provider in the LNG space. They specialize in Floating LNG facilities and Floating Storage and Regasification Units. Their core strength is speed and cost-effectiveness in deploying these solutions. Its market cap currently stands at $3.24 billion.
GLNG stock is up nearly 37% on a YTD basis, outperforming the Energy Select Sector SPDR Fund's (XLE) rise of 9.2% in the same period. The stock pays a forward dividend yield of 3.22% annually, and with a modest payout ratio of 39.79%, the dividend is well-covered by earnings.
The company's EPS have exceeded expectations in each of the past five quarters, with a beat reported in the most recent first quarter, as well.
Amid a challenging environment for energy companies, however, Golar reported a yearly decline in both revenue and earnings. The company reported operating revenues of $64.96 million, down 12% from the previous year. EPS fell by roughly 31% to $0.45, but managed to top the consensus estimate.
In terms of liquidity, Golar closed the quarter with a cash balance of $622 million and net debt of $587 million. During Q1, the company generated net cash from operations of $36.5 million, down from $59.6 million in the prior year.
Over the past 10 years, the company's revenues and EPS have expanded at a CAGR of 13.04% and 9.47%, respectively.
Golar LNG is well-positioned to capitalize on the growing FLNG market. By 2026, an estimated 22 million metric tons per annum (mmtpa) of floating LNG supply is expected to be operational. Golar owns two FLNG facilities: Hilli, currently under contract with Perenco in Cameroon, and the recently added FLNG Gimi. Gimi is already stationed in the Mauritania/Senegal GTA (Greater Tortue Ahmeyim) offshore gas field, with a 20-year contract with BP (BP). Golar's fleet also includes two LNG carrier assets, LNG Fuji and LNG Arctic.
All four analysts in coverage have unanimously deemed GLNG stock a “Strong Buy,” with the mean target price of $44.62, which indicates an upside potential of about 41.7% from current levels.
Energy Stock #2: Murphy Oil
Based out of Houston and founded in 1950, Murphy Oil (MUR) explores and produces crude oil (CLQ24), natural gas (NGQ24), and natural gas liquids (NGLs) worldwide. They have a strong presence in the deepwater Gulf of Mexico and international assets in Malaysia, Canada, and Suriname. The company's market cap currently stands at $6.26 billion.
MUR stock is down 3.3% on a YTD basis. The stock offers a dividend yield of 2.92%, and it has raised dividends consistently since 2021. Moreover, with a conservative payout ratio of just 27.85%, there's plenty of room for continued dividend increases.
Murphy's results for the first quarter were impressive, as both revenue and earnings surpassed estimates. Revenues for the quarter came in at $796.41 million, down 5.4% from the previous year, as revenue from sales to customers nosedived. EPS dipped by 31.5% over the same period to $0.85. However, that surpassed the consensus estimate of $0.83.
Net cash from operating activities increased by 42.5% from the previous year to $398.8 million, and the company closed the quarter with a cash balance of $323.43 million. Long-term debt levels remained almost unchanged from the previous year at $1.33 billion.
Over the past five years, Murphy Oil's revenue and EPS have clocked CAGRs of 10.5% and 43.9%, respectively.
Looking ahead, Murphy Oil's growth plans are on track, and are expected to accrue benefits in the long run. For instance, its Vietnam offshore project is now proceeding to production. The company will also be drilling two exploration wells. Elsewhere, in the Tano Basin project in Ivory Coast, the company was awarded an acreage of roughly 152 Gulf of Mexico acres, with management now scouring for partners to manage the oil deposits from here.
Management also carried out a buyback of its stock worth $50 million at an average price of $39.25 per share. After the company pays off debt of about $300 million more (to take its debt below the desired threshold of less than $1 billion), shareholders will receive 50% in benefits rather than the current 25%.
Analysts have an average rating of “Moderate Buy” for MUR stock, and the mean target price of $51.13 indicates an upside potential of about 24% from current levels. Out of 15 analysts covering the stock, 7 have a “Strong Buy” rating and 8 have a “Hold” rating.
Energy Stock #3: Matador Resources
We conclude our list with Matador Resources (MTDR), an independent exploration and production (E&P) company focused on unconventional oil and natural gas plays in the United States. Founded in 2003 by industry veteran Joseph Foran, Matador's primary operations target the liquids-rich portions of the Wolfcamp and Bone Spring formations in the Delaware Basin (West Texas and Southeast New Mexico). Matador currently commands a market cap of $7.47 billion.
MTDR stock is up 6.4% on a YTD basis, and it offers a dividend yield of 1.33%. With a payout ratio of just 10.74%, Matador has ample room to raise dividends in the coming years.
Matador's numbers for the first quarter were strongly positive, as revenue and earnings both rose in a tough environment, and exceeded the Street's expectations. Revenues for the quarter were reported to be $787.7 million, up 40.6% from the prior year, to crush expectations for $726.1 million. EPS rose by 14% in the same period to $1.71, and surpassed the consensus estimate of $1.53, continuing Matador's trend of beating bottom-line estimates.
Production numbers were also impressive. Total oil equivalent net production volumes were 13,628 million barrels of oil equivalent (MBOE), compared to 9,599 MBOE in the same period a year ago. Average daily production volumes also surged to 149,760 barrels of oil equivalent per day (BOE/d) from 106,654 BOE/d in the prior year.
Net cash from operating activities increased by 38% from the previous year to $468.56 million, with an adjusted free cash flow of $28.56 million. Although Matador's cash balance of $23.2 million is much lower than its debt levels of about $2 billion, its next debt maturity isn't until 2028.
Over the past 10 years, Matador's revenues and EPS have grown at impressive CAGRs of 25.62% and 28.5%, respectively.
Matador Resources solidified its position as a top 10 producer in the Delaware Basin with the recent $1.9 billion acquisition of Ameredev, a strategic "bolt-on" deal. This acquisition expands Matador's acreage in the basin to over 50,000 acres, particularly in the key Antelope Ridge area. Ameredev also brings a 19% stake in Piñon midstream assets, reducing reliance on third-party gathering and improving cost efficiency. Matador is now anticipating to end 2024 with nearly 100,000 barrels per day in oil production.
Overall, analysts have deemed the stock a “Strong Buy,” with a mean target price of $79.58 - which denotes an upside potential of about 31.5% from current levels. Out of 12 analysts covering the stock, 9 have a “Strong Buy” rating, 2 have a “Moderate Buy” rating, and 1 has a “Hold” rating.
