Diamondback Energy (FANG) Valuation Update - June 8

[dan_s]

Diamondback is a great American Success Story, gaining 122% in 2021 and up another 44% YTD. However, their new strategy is to keep production flat and payout a lot of free cash flow in the form of a "Base + Variable" dividend. Their Q1 dividend was $3.05/share for annualized yield of 7.6%. Based on my forecast model, the dividend should be going higher each quarter. They also have a well-funded share repurchase program underway.

The Sweet 16 is a "Growth Portfolio", so I will be moving Coterra Energy (CTRA) and Diamondback Energy (FANG) to our High Yield Income Portfolio in my next newsletter, which s/b published on June 20.

FANG and its controlled subs RTLR and VNOM have a lot of upside for us. If you are investing of high yield, they should be in your portfolio. RTLR and VNOM are publicly traded partnerships that have elected to be taxed as C-Corps. So, they are all suitable for IRA accounts.

At the time of this post FANG was trading at $160.05.

I have updated my forecast/valuation model, using my new oil & gas price deck. My valuation of FANG increases by $23 to $233.

TipRanks: "In a report issued on June 3, Derrick Whitfield from Stifel Nicolaus maintained a Buy rating on Diamondback (FANG), with a price target of $236.00."