%ViperEnergy (NASDAQ: $VNOM) is a small-cap stock that pays a big dividend.
The company is based in Midland, Texas, the heart of the U.S. energy sector. It owns and acquires mineral and royalty interests in oil and %NaturalGas properties in the Permian Basin.
Viper Energy was spun off from publicly traded %DiamondbackEnergy (NASDAQ: $FANG) in 2014 to acquire and exploit %Oil and natural gas properties, mostly in Texas.
Today, Diamondback Energy owns about 75% of Viper Energy’s stock, making the company the majority shareholder.
However, Viper Energy is proving to be a good investment for all of its shareholders, with the stock having gained 22% over the last 12 months and risen nearly 200% in the past five years.
Despite the strong performance, Viper Energy’s stock has a low and attractive valuation, trading at only 11 times this year’s earnings estimates.
Viper Energy also has a market capitalization of only $8.10 billion U.S., making it a small-cap security.
However, the real attraction with Viper Energy is the company’s chunky dividend. Currently, Viper Energy pays its stockholders a quarterly dividend of $0.62 U.S. per share.
That gives VNOM stock a dividend yield of just under 6%, which is huge by any measure.
Owing to its hefty dividend and strong share price performance, U.S. investment bank %GoldmanSachs (NYSE: $GS) recently added Viper Energy to its closely watched “conviction list.”
Goldman Sachs says that only the “best-of-the-best stocks” make it onto its coveted conviction list that’s comprised of a maximum of 25 securities.
In the case of Viper Energy, Goldman Sachs likes the company’s “no capex business model,” and sees the stock as a “compelling” way to gain exposure to the Permian Basin.
Viper Energy’s stock has declined about 15% so far this year as crude oil prices slump. However, Goldman Sachs says investors should view the pullback as a buying opportunity.
Viper Energy’s stock is currently trading at $142.70 U.S. per share.
