The energy sector of the S&P 500 has been the year’s best performer, yet oil stocks still appear to be inexpensive when compared with those in other industries.
Below is a list of large-cap energy companies expected to generate the highest levels of free cash flow to support dividends and share buybacks next year. First, let’s look at sector valuations and expectations for next year. This means investors have to expect some difficult year-over-year comparisons of results during each quarterly earnings season in 2023.
“The lack of upstream investment over the past decade and an unwillingness of developed world economies to add sufficient capacity domestically, preferring ‘renewables.’ has meant that global energy companies have run their businesses for cash.” At the same time, oil companies have been raising regular dividends, paying special dividends and emphasizing share buybacks. If stock repurchases are sufficient to lower the share count, earnings per share will increase and potentially support higher share prices.