Santos: The Top ASX 200 Energy Share for Investors, According to Broker Analysis

Broker Says Santos is the Best ASX 200 Energy Share to Buy Now

Introduction

In the ever-changing landscape of the Australian Stock Exchange (ASX), investors are constantly seeking potential opportunities for growth and diversification. One sector that has caught the attention of analysts at Morgans is the energy sector, and specifically, Santos Ltd (ASX: STO) shares. As the leading provider of energy shares on the ASX, Santos is being touted as the best option for investors looking to gain exposure to this sector. In this report, we will delve into the reasons behind Morgans’ recommendation and explore the potential benefits of investing in Santos.

Why Santos?

According to Morgans, Santos stands out from its competitors due to its strong gross profile and diversified earnings base. These factors put the company in a favorable position to outperform its peers during a sector recovery. The broker currently rates Santos shares as “add” with a price target of $8.75. With Santos shares currently trading at $7.57, this suggests a potential upside of over 15% in the next 12 months.

Furthermore, Morgans forecasts attractive dividend yields for Santos shareholders. The broker expects dividends of 34.1 cents per share in FY 2023 and 46 cents per share in FY 2024. These dividends translate into yields of 4.5% and 6.1% respectively, making Santos an enticing option for income-focused investors.

Analysis of Morgans’ View

Morgans substantiates its bullish view of Santos by highlighting several key factors. Firstly, the resilience of Santos‘ growth profile and diversified earnings base are seen as significant advantages in the context of a broader sector recovery. This implies that even in uncertain economic conditions, Santos is well-positioned to weather the storm and continue delivering positive results.

Additionally, the potential growth opportunities presented by the Dorado project, along with Santos‘ increased stake in Darwin LNG, further strengthen Morgans’ confidence in the company’s prospects. However, it is worth noting that the growth potential in Papua New Guinea (PNG) remains a riskier proposition due to the government’s preference for a larger share of economic rents, as well as deferred growth plans by operator Exxon across its global portfolio.

Conclusion

With the energy sector showing signs of recovery, Santos emerges as a top pick for investors looking to gain exposure to this industry. Morgans’ recommendation is based on Santos‘ strong gross profile, diversified earnings base, and potential growth opportunities. The attractive dividend yields offered by the company further add to its appeal.

However, it is essential for investors to exercise caution and conduct their own thorough analysis before making investment decisions. While Morgans’ analysis is insightful, it is imperative to weigh the risks associated with potential headwinds in the energy sector and geopolitical factors that may impact Santos‘ operations.

Ultimately, investors must align their investment goals and risk tolerance with the opportunities the stock market presents. As with any investment, diversification and long-term thinking are key to achieving optimal outcomes.