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Piper Sandler followed Wells Fargo's lead recently by raising its price target on Devon Energy (NYSE: DVN) from $59 to $60 and maintaining an overweight rating on the stock. The $60 target implies a 14% upside to the stock price over the next 12 months or so.

Dividends, buybacks, and improving productivity

Devon Energy investors are looking forward to substantive dividends and buybacks from the company this year, in addition to the potential for share price appreciation. As such, it's not hard to pencil in the potential for a 20% total return from the stock, provided you believe in the $60 price target.

To do so requires confidence that the current price of oil is sustainable at around $83 a barrel. While it's tough to predict energy prices, investors in oil stocks take heart from the relatively high prices so far in 2024 (during a weak period of global economic growth). Investors are also keeping an eye on coordinated production cuts by OPEC and OPEC+ countries, and the need to replenish the U.S. strategic petroleum reserves following a significant drawdown by the current administration.

Moreover, Devon Energy's upside potential doesn't just rely on higher energy prices. The company is also aiming to improve its well productivity this year by drilling in its higher-quality core assets in the Delaware Basin. Management is allocating 60% of its capital spending this year to the Delaware Basin with the expectation that it will result in a 10% improvement in well productivity compared to 2023.

Devon Energy's upcoming earnings

The company will release earnings on May 1 and investors are looking for an update on its drilling operations and its cash return strategy, which includes share buybacks (made a priority in the first quarter) and fixed and variable dividend payouts.

With the current price of oil, it's likely to be a positive update. As such, I think it's a highly attractive stock for oil bulls and income-seeking investors alike.

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Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.