Wall Street upgrades oil and gas stock ConocoPhillips on rising dividends
Investors should buy ConocoPhillips shares because the oil and gas company will increase its capital return to shareholders, according to Jefferies, which raised its rating on ConocoPhillips to buy from hold. "COP has recast its business model since the oil price downturn and is now focusing on returns rather than chasing growth. The company has aggressively cut both capital spending and operating expenses," analyst Jason Gammel wrote in a note to clients Wednesday. "Management has expressed a commitment to returning cash to shareholders." Gammel raised his price target for ConocoPhillips to $59 from $55, representing 25 percent upside from Tuesday's close. He cited how the company already announced asset sales worth $16 billion such as the $13.3 billion Foster Creek/Christina Lake deal, which is double the high end of the $5 billion to $8 billion of divestitures the company projected for 2017 and 2018. Gammel predicts the company can use $13 billion from the asset sales for share buybacks and larger dividends through 2020. He estimates annual dividend growth of 2 to 5 percent. "Aggressive divestitures have repaired the balance sheet more quickly than we expected. COP is now well positioned to generate free cash flow in even a low oil price environment," the analyst wrote. ConocoPhillips currently has a 2.3 percent dividend yield, according to FactSet.

Conoco Phillips Bayu Undan Timor in Sea, Australia Source: Conoco Phillips