Goldman Sachs recently called out a handful of buy-rated stocks that are powering data centers – a couple of these names also offer income and upside potential. Earlier this month, the firm rolled out the latest edition of its “Ten Buys” list of energy and power stocks that offer compelling risk/reward at current levels. Goldman highlighted five investment themes behind its list of stocks: upside from mergers and acquisitions; bullish sentiment on refining; mean reversion in Big Oil; attractive risk/reward in international oil services and the data center/power growth story. Kodiak Gas Services and The Williams Cos turned up in the data center power cohort, and both offer dividends that are beating the S & P 500’s current dividend yield of 1.04%. Kodiak Gas Services The Texas-based energy infrastructure company provides natural gas compression services, and Goldman deems it “one of the more interesting opportunities in our midstream smid-cap coverage.” The firm sees roughly 15% earnings before interest, taxes, depreciation and amortization growth through 2030, driven by the company’s core compression business and Kodiak’s expansion into “behind-the-meter” power generation. Behind-the-meter refers to generating or storing energy on the customer’s side of the power meter, and it’s a way for data centers to come up with the power they need without straining the local grid. Earlier this month, Kodiak and Baker Hughes announced a multiyear agreement in which Baker will provide gas turbines and generators to support Kodiak’s behind-the-meter power efforts. When it comes to its buy rating on Kodiak, Goldman Sachs is in good company: All 15 of the analysts covering the stock deem it a buy or strong buy, according to LSEG. The consensus price target suggests 27% upside for the stock, but Goldman’s $89 price target implies the firm sees shares surging more than 36% from Friday’s close. Shares are up nearly 75% this year alone, and the stock has a dividend yield of 3%. The Williams Cos The natural gas infrastructure company, headquartered in Oklahoma, is “one of the more compelling Buys in our large-cap midstream coverage on the back of the ongoing natural gas demand theme,” Goldman said. While the company’s traditional pipeline announcements have been modest, Goldman finds Williams’ diversification into behind-the-meter deals to be especially attractive. “We think the market continues to underestimate the number of future [behind-the-meter] wins, their options to fund incremental projects, and the potential for larger pipelines announcements to pick up – with the overall risk to our EBITDA [compound annual growth rate] likely to the upside,” Goldman wrote. On an earnings call in May, Williams leadership announced a trio of new projects: Neo, a behind-the-meter project with “a high quality hyperscaler;” Atlas, a gas infrastructure agreement to serve “a large investment-grade customer data center” in the Northeast; and Silver Spur, an expansion of Williams’ Northwest Pipeline system. Goldman’s price target of $82 suggests nearly 12% upside from Friday’s close. Shares have popped about 24% year to date, and the stock offers a current dividend yield of 2.8%. Twenty out of 25 analysts covering the stock say it’s a buy or strong buy, according to LSEG, and consensus price targets see more than 11% upside. Other dividend payers that made it to Goldman’s “Ten Buys” list of energy names include Expro Group Holdings , which has a current yield of about 1.9%; Marathon Petroleum , which has a current yield of around 1.3%; and ConocoPhillips , which yields 2.8%.
Goldman Sachs’ top 10 list of energy stocks includes dividend payers
