Crude futures (CLF24) are in focus ahead of Wall Street's holiday break, as higher domestic inventories and reports of a delayed OPEC+ meeting briefly sent the January-dated contract south of $75 per barrel.  In fact, the most active crude futures contract has now shed about 20% from its late-September highs near $95.

Despite notable volatility in energy prices, the sector remains a favorite among income investors seeking out high dividend yields. In this context, Diamondback Energy (FANG), an independent oil and natural gas company operating within the expansive grounds of the Permian Basin, emerges as a compelling stock pick.

The Permian Basin's oil output has started to rival key energy producing nations like Russia and Saudi Arabia, and the forecast for 2024 suggests it might contribute a staggering 50% of total U.S. oil production. Diamondback Energy's forte lies in acquiring, developing, and exploring unconventional oil and gas reserves within this basin, leveraging horizontal drilling techniques to access multiple intervals across the Wolfcamp, Spraberry, and Bone Spring formations.

The strategic positioning of FANG in the Permian Basin, coupled with the stock's robust yield, make this a top idea in the oil patch right now. Here's what you need to know about this dividend powerhouse.

An Energy Stock Setting a Strong Pace

FANG's been a star player on the charts, despite the volatility and uncertainty in the broader energy space this year. Year-to-date, FANG is up 18.8% - right in line with the performance of the S&P 500 Index ($SPX). By comparison, the S&P 500 Energy Sector SPDR (XLE) is off 1% for the year. 

That YTD price performance also compares quite favorably to other high-yield Permian oil stocks, including Exxon Mobil (XOM) takeover target Pioneer (PXD), Conoco Philips (COP), EOG Resources (EOG), and Devon Energy (DVN).

With a formidable market cap of $27.75 billion and an enterprise value reaching $33.84 billion, FANG is well-positioned financially. And when it comes to the earnings game, FANG isn't just playing — it's dominating. 

The latest Q3 report, released earlier this month, crushed Wall Street's expectations. FANG delivered adjusted EPS of $5.49 per share, surpassing the anticipated $4.90 by more than 12%. Revenues checked in at $2.34 billion, which also topped the average analyst estimate.

Looking ahead, analysts are targeting EPS growth of 17% in FY 2024 to $21.72 per share. At 7.25x 2024 earnings, FANG appears reasonably priced at current levels.

FANG's Dividend History and 2024 Forecast

When it comes to paying back shareholders, FANG is currently dishing out a base quarterly dividend of $0.84 per share, along with variable dividends - for a total cash payout of $3.37 per share in the latest quarter. So while the forward dividend yield is a relatively tame 2.17%, the trailing 12-month yield is north of 5%.

Diamondback Energy has room to keep fueling future dividend payments, too. The payout ratio is just 37%, and the company has ample cash flow and earnings to support continued growth. 

Analysts are shouting a “Strong Buy” for FANG in 2024. Out of 23 analysts, a solid 19 are in the "Strong Buy" camp, one is going for a "Moderate Buy," 2 say "Hold," and just one dares to suggest a "Moderate Sell." The group has a mean target price of $183.91 for FANG, implying expected upside of 19.5% from current levels.

Wrap-Up

In conclusion, FANG's the rare energy stock that's actually keeping pace with its parent S&P 500 Index this year. As a leading energy name in the Permian Basin, FANG offers growth potential in 2024, alongside its robust dividend yield - and some bonus takeover target potential, too.