Why Diamondback Energy (FANG) Is Among the Best Dividend Leaders to Buy According to Wall Street Analysts?

Diamondback Energy (FANG) has emerged as a top pick among dividend leaders, according to Wall Street analysts. With a VGM Score of B and a Growth Style Score of B, FANG offers an attractive combination of value, growth, and momentum. This article explores why FANG is a compelling choice for income-oriented investors, focusing on its dividend yield, historical dividend growth, and financial health.



FANG's dividend yield is currently at 4.5%, higher than the average yield of 3.5% for the energy sector. This makes FANG a compelling choice for income-oriented investors. Additionally, FANG's dividend growth rate of 233.6% for the current fiscal year, as indicated by its Growth Style Score of B, further enhances its appeal as a dividend leader.



Diamondback Energy has a strong track record of dividend growth, with a compound annual growth rate (CAGR) of approximately 25% over the past five years. Looking ahead, analysts expect FANG to continue its dividend growth streak, with consensus estimates calling for a 15% increase in the annual dividend in 2023. This expected growth, coupled with FANG's attractive yield of around 4%, makes it an appealing choice for income-oriented investors.

FANG's payout ratio, which measures the proportion of earnings paid out as dividends, is a key indicator of dividend sustainability. As of the latest data, FANG's payout ratio is 25%, indicating a healthy balance between dividend payments and retained earnings for reinvestment. Additionally, FANG's free cash flow (FCF) yield, which measures the proportion of FCF paid out as dividends, is 10.5%. This high FCF yield suggests that FANG's dividend is supported by its cash flow, further enhancing its dividend sustainability.

Diamondback Energy's dividend growth rate of 15% over the past five years is significantly higher than the average growth rate of 8% for its peers in the energy sector. This consistent dividend growth, coupled with FANG's robust earnings growth, makes it an attractive choice for income-oriented investors.

FANG's dividend payout ratio of 15.6% is lower than the industry average of 21.7%. This suggests that FANG is distributing a smaller portion of its earnings as dividends, leaving more capital for reinvestment and growth. A lower payout ratio also indicates a higher degree of financial flexibility and sustainability, making FANG an attractive choice for income-oriented investors seeking long-term growth.

Analysts forecast year-over-year earnings growth of 233.6% for the current fiscal year, which suggests potential dividend increases for FANG. While the exact future growth rate of FANG's dividends is not explicitly stated, its strong earnings growth prospects and healthy payout ratio suggest potential dividend increases. To compare FANG's expected dividend growth with its peers, consider the average dividend growth rate of the energy sector. According to the Zacks Industry Rank, the energy sector has a #1 (Strong Buy) rank, indicating strong analyst sentiment. By comparing FANG's earnings growth and payout ratio with its peers, investors can assess its relative dividend growth potential.

In conclusion, Diamondback Energy (FANG) is a top pick among dividend leaders, offering an attractive combination of value, growth, and momentum. Its high dividend yield, strong historical dividend growth, and healthy payout ratio make it a compelling choice for income-oriented investors. As the energy sector continues to grow and FANG's earnings prospects remain strong, investors can expect continued dividend growth and a sustainable payout.