Buy Small-Cap Stock Viper Energy For Its Hefty 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.

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