Buy these cheap dividend-paying energy stocks, Goldman Sachs says

There is still an opportunity to grab attractive dividend-paying energy names, despite the sector's run higher this year, according to Goldman Sachs.

While the firm continues to see long-term value in the oil and gas sector, it recognizes the area is outperforming the broader market right now. The State Street Energy Select Sector SPDR ETF (XLE) has gained 45% so far this year and hit a 52-week high on Thursday.

In comparison, the S & P 500 is up 13% year to date. XLE YTD mountain State Street Energy Select Sector SPDR ETF year to date Energy companies have benefited from the jump in oil prices due to the conflict in the Middle East. Brent crude futures closed above $95 per barrel .

"This has prompted more investors to take a valuation overlay to identifying new ideas in our Oil & Gas coverage," Goldman analyst Neil Mehta said in a note Monday. "For those screening for value, we screen our comparison sheets and identify Buy-rated stocks that currently offer above-average total return while trading at below-average 2028 multiples as investors position into year-end."

Here are some of the names that made the cut: Devon Energy has gained roughly 33% so far this year, versus a 40% advance for its large-cap oil exploration and production peers, said Mehta, calling the name "a compelling valuation opportunity." "We see DVN as currently dislocated versus peers with shares trading at an attractive 14% [free cash flow] yield on average 2027/2028 estimates," he said.

He also has a constructive view on Devon Energy's development and focus on the Delaware Basin asset as the core of its long-term portfolio. Plus, the company seeks to return up to 70% of its free cash flow to shareholders, he added. Last month, Devon Energy handily beat earnings and revenue expectations for its second quarter.

It announced a dividend hike in May. Mehta's $55 price target implies 12% upside from Wednesday's close. The stock pays a 2.3% dividend yield.

Gas exploration and production name, Expand Energy , also has a compelling valuation relative to its Appalachian peers, according to Mehta. He sees it currently trading at a 10% free-cash-flow yield on his average 2027/2028 estimates relative to its peer average of 8%. Expand Energy, which yields 2.3%, has reliable free cash flow and a steady capital return program, Mehta said.

In addition, he believes in its ability to "generate sustainable cash flow improvement through incremental marketing and commercial initiative." The company posted mixed second-quarter results in July, with its adjusted earnings per share topping expectations and its revenue falling short. Shares are down roughly 10% so far in 2026.

U.S. refiner HF Sinclair , on the other hand, has rallied 131% year to date — and also hit a 52-week high on Thursday. Despite that, Mehta believes the stock trades at a discount to its refiner peers due to uncertainty around the CEO and chief financial officer transitions.

Both are currently interim roles. "[W]e continue to see value in the company's non-refining earnings contributions (Lubricants, Renewable Diesel, and Midstream) in addition to the company's leverage to niche refining markets (West Coast/Rockies and Mid-Continent)," Mehta wrote. HF Sinclair posted a beat on both its top and bottom lines for the second quarter and raised its quarterly dividend.

The stock currently yields about 2%. Mehta's $114 price target suggests 7.5% upside from Wednesday's close. Lastly, oil major ConocoPhillips has a $146 price target, which implies more than 6% upside ahead.

Goldman's buy rating 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. The stock is trading at a discounted multiple, which reflects "a heavy phase of the capital cycle, with the market hesitant to pay for a back-half-weighted free cash flow inflection, where the bulk of the uplift lands in 2029," Mehta wrote.

ConocoPhillips has gained 45% year to date, hitting a 52-week high on Thursday. It currently yields 2.5%.