ConocoPhillips Is A Top Sector Yield Name, BofA Says

Within a peer group that prioritizes dividends over growth, relative value had shifted to ConocoPhillips COP, BofA Merrill Lynch’s Doug Leggate said in a report. The analyst maintained a Buy rating for the company, with a price objective of $71.

Although ConocoPhillips has a low dividend payout of 2.2 percent and a dividend cut earlier this year was viewed negatively by investors, analyst Doug Leggate named the company as the “top ‘free cash’ yield idea.” He added that ConocoPhillips was well positioned to deliver outsize returns to shareholders via buybacks, while “potentially supporting competitive ‘growth per share’ that bridges the gap between the majors and the E&Ps.”

Under Supply In Commodity

There could be “an accelerated rebalancing” of global supply and demand commencing in the back half of 2016, as non-OPEC growth stalls. Supply disruptions could occur again, while the global inventory cushion weakens.

“With the consequence of under investment in both short & long cycle projects, we believe the commodity discussion is poised for a shift towards one of under supply and increased risk that oil prices overshoot to the upside. In that scenario, ‘big oil’ would likely lag more levered peers, further positioning COP as our preferred major oil name,” Leggate wrote.