Goldman Sachs says investors can still find attractive dividend-paying energy stocks even after the sector’s sharp gains in 2026. The bank argues that oil and gas continues to offer long-term value, although the group is currently outperforming the broader market.
The State Street Energy Select Sector SPDR ETF (XLE) is up 45% year to date and reached a 52-week high on Thursday. By comparison, the S&P 500 has gained 13% this year. Energy shares have also been supported by higher oil prices linked to the conflict in the Middle East, with Brent crude futures closing above $95 per barrel.
In a note published Monday, Goldman analyst Neil Mehta said the backdrop has pushed more investors to focus on valuation when looking for new ideas in the bank’s Oil & Gas coverage. He said Goldman screened for Buy-rated stocks that offer above-average total return while trading at below-average 2028 multiples.
Devon Energy
Mehta described Devon Energy as a compelling valuation opportunity. The stock has climbed about 33% so far this year, compared with a 40% gain for its large-cap oil exploration and production peers.
According to the analyst, DVN appears dislocated relative to peers, with shares trading at an attractive 14% free-cash-flow yield based on average 2027/2028 estimates. He also pointed to Devon Energy’s development progress and its focus on the Delaware Basin asset as the core of its long-term portfolio. In addition, the company aims to return up to 70% of its free cash flow to shareholders.
Last month, Devon Energy beat second-quarter earnings and revenue expectations, and in May it announced a dividend increase. Mehta’s $55 price target implies 12% upside from Wednesday’s close. The stock yields 2.3%.
Expand Energy
Goldman also sees attractive valuation in Expand Energy relative to its Appalachian peers. Mehta said the company is currently trading at a 10% free-cash-flow yield on his average 2027/2028 estimates, versus an 8% peer average.
Expand Energy, which yields 2.3%, has reliable free cash flow and a steady capital return program, the analyst said. He also believes the company can deliver sustainable cash-flow improvement through incremental marketing and commercial initiatives.
The company reported mixed second-quarter results in July, with adjusted earnings per share beating expectations while revenue missed. Its shares are down roughly 10% so far in 2026.
HF Sinclair
Shares of U.S. refiner HF Sinclair have surged 131% year to date and also hit a 52-week high on Thursday. Even so, Mehta believes the stock still trades at a discount to other refiners because of uncertainty surrounding the CEO and chief financial officer transitions. Both positions are currently interim roles.
Goldman says the company’s value is also supported by non-refining earnings contributions from Lubricants, Renewable Diesel, and Midstream, along with its exposure to niche refining markets in West Coast/Rockies and Mid-Continent.
HF Sinclair beat both revenue and earnings expectations in the second quarter and raised its quarterly dividend. The stock currently yields about 2%, and Mehta’s $114 price target suggests 7.5% upside from Wednesday’s close.
ConocoPhillips
Goldman Sachs also maintains a Buy rating on ConocoPhillips. Mehta’s $146 price target implies more than 6% upside.
The bank’s positive view is based on a $7 billion free-cash-flow inflection by 2029 as four major growth projects come online and the company cuts $1 billion in costs. Mehta said the stock is trading at a discounted multiple because the market remains cautious about a heavy phase of the capital cycle and a back-half-weighted free-cash-flow improvement, with most of the uplift expected in 2029.
ConocoPhillips shares are up 45% year to date and reached a 52-week high on Thursday. The stock currently yields 2.5%.
