Phillips 66
This extremely diversified energy company has a long and successful operating history, and it is a longtime Goldman Sachs Conviction List member. Phillips 66 (NYSE: PSX) operates through four segments: Midstream, Chemicals, Refining, and Marketing and Specialties. The company holds many of these assets within its master limited partnership (MLP), Phillips 66 Partners.
The company benefits from the tax-advantaged structure while still operating a more diversified operating business that also contains many assets that are not ideal MLP assets, such as its fast-growing chemical manufacturing business and its super-profitable refined products marketing business.
Phillips 66 is the top idea within refining coverage at Goldman Sachs, which continues to see headroom for incremental capital returns this year. The analysts are constructive on a positive rate of change at Refining and continue to see attractive non-refining value in the other segments.
Shareholders receive a 4.22% dividend. The Goldman Sachs price target is $125. Phillips 66 stock has a consensus target of $124.08, and shares ended Tuesday trading at $99.65.
Pioneer Natural Resources
Many Wall Street analysts love this stock as a pure crude oil play, and the company also employs a variable dividend strategy. Pioneer Natural Resources Co. (NYSE: PXD) operates as an independent oil and gas exploration and production company in the United States.
The company explores for, develops and produces oil, natural gas liquids (NGLs) and natural gas. It has operations in the Midland Basin in West Texas. As of December 31, 2021, the company had proved undeveloped reserves and proved developed non-producing reserves of 130 million barrels of oil, 92 million barrels of NGLs and 462 billion cubic feet of gas, and it owned interests in 11 gas processing plants.
Pioneer production services are supported by 100 well-servicing rigs, more than 100 cased-hole, open-hole and offshore wireline units, and a range of advanced coiled tubing units.
The company is a huge player in the Permian basin and the Eagle Ford in Texas, and it owns more than 20,000 locations in the world’s second-largest oil reservoir in the Midland Basin. With a stellar balance sheet, the company is poised to remain a top player in the Permian, as it expects to deliver solid production growth going forward.
Investors receive a 12.17% dividend, but remember that it may vary from quarter to quarter. Pioneer Natural Resources stock has a $263 target price at Goldman Sachs. The higher consensus target is $272.35, but Tuesday’s close was at $205.94 a share.
These more defensive companies can continue to thrive if we slip into a recession and if the market goes back into sell-off mode. They should be able to hold their own if the risk-off contingent returns in a big way. All are among the leaders in their respective sectors, and they should continue paying their dependable dividends.
Originally published at 24/7 Wall St.
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