Analysts Think This Dividend Stock Is Headed For Big Payout Growth Ahead

With a healthy yield of 3.31%, ConocoPhillips ( COP ) is one of the market’s best-selling dividend growth engines. Not only does it continue to generate strong cash flow, with a strong focus on rewarding shareholders with buybacks and dividends, but it is also well positioned for multi-year compound annual dividend growth. That’s according to Wells Fargo analyst Sam Margolin, who argues that ConocoPhillips’ liquidity and yield will improve thanks to multiple catalysts.

One of the main catalysts is the company’s Willow Project in Alaska, which is expected to start up in 2029 and deliver about 180,000 barrels of oil per day at peak. This should help drive $4 billion of free cash flow inflation through 2029 and serve as a major boost to the company. It is also targeting about $14 billion of free cash flow in an oil price environment of $70 in 2029. Second, the analyst argues that the company’s free cash flow is expected to grow, which will allow it to increase dividends over the coming years. Growth will be driven by:

• The end of its capital commitment on the Qatar LNG project. The company is now 80% complete with the total capital of the LNG project.

• The start of new projects, especially Qatar LNG and Port Arthur LNG.

• The Port Arthur project should pay dividends, which will help finance share buybacks and reduce the overall dividend load.

Three, as noted in the company’s latest earnings release, the company expects to “reduce capital and operating costs with flat to modest production growth. Willow’s total project capital is upgraded to $8.5 to $9 billion, with total LNG project capital reduced to $3.4 billion. Powered by our deep, durable and diverse portfolio, we remain on track to deliver incremental cash flow with an expected $1927 billion annually from 2026 to 2028.”

We should also note that in the first half of 2025, the company had a payout rate of 46%, with approximately $4.69 billion spent on buybacks ($2.722 billion) and dividends ($1.968 billion). In the third quarter, it delivered $2.2 billion to shareholders, including $1.3 billion in buybacks and $1 billion in dividends. For the fourth quarter, it increased its dividend by 8% to 84 cents per share.

In short, COP remains one of the most oil-fueled dividend growth engines in the market. This should not change anytime soon.

While we wait for its next batch of earnings on February 5, let’s take a look back at Q3. In the quarter, profits fell to $1.7 billion, or $1.38 per share, from $2.1 billion, or $1.78 per share, year over year (YoY). Q3 adjusted EPS of $1.61 beat estimates of $1.41. Q3 production jumped 25% YoY to 2.4 million barrels of oil per day. For 2026, it is targeting $12 billion in capital expenditures, $10.2 billion in operating costs, and flat production growth of 2% as the project progresses at the Alaska willow project.

Overall, COP stock has a “Strong Buy” rating among 28 analysts. Of these, 17 have a “Strong Buy” rating, four have a “Moderate Buy” rating, six have a “Hold” rating, and one has a “Moderate Sell” rating. Currently, COP has an average price target of $113.37. The high target is $132 from its current price of $103.41.

At the date of publication, Ian Cooper did not hold (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. This article was originally published on Barchart.com