Owners of Woodside Energy Group Ltd (ASX: WDS) shares, rejoice! Morgan Stanley has reportedly tipped the S&P/ASX 200 Index (ASX: XJO) company to be a future dividend machine.
The newly merged energy giant currently has a market capitalisation of more than $60 billion. But that could be just the beginning.
Let's take a look at what Morgan Stanley reportedly expects from the fresh-faced juggernaut over the coming years.
Woodside shares tipped to pay out US$20bn of dividends
Off-market buybacks, mergers and acquisitions, and US$20 billion (AU$27.8 billion) of dividends, oh my! Morgan Stanley reportedly sees green pastures for Woodside shares.
The top broker has tipped the ASX 200 company as a "must-own" energy play, particularly for gas-focused investors, The Australian reports.
"It has some of the strongest leverage to oil and gas prices globally and the structural tailwinds behind gas may see its global discount reverse," the broker reportedly told clients.
But what about dividends? Morgan Stanley is said to expect the company to provide billions of dollars in payouts over the coming years. The publication quoted it as saying:
We forecast Woodside will distribute US$20 billion in dividends over the coming decade, providing it with another US$20 billion to re-invest in growth, diversify, and pursue further capital management.
In addition, we forecast a strong dividend yield in the 10% [to] 12% range over the next few years should energy prices remain elevated.
The company is also tipped to start a journey of growth with its newly reset balance sheet.
The broker reportedly believes the company could execute US$4 billion of off-market share buybacks over the next 18 months. That could lift to between US$6 billion and US$8 billion if it capitalises on potential Asian gas assets.
And that's not all. Woodside's current position means it could be on the lookout for new mergers and acquisitions, according to the broker.
"A strong balance sheet also puts the company in a position of strength to execute its [merger and acquisition] processes which could potentially provide look-through value to its portfolio," Morgan Stanley was quoted as saying.
Morgan Stanley reportedly has a $40 price target and an 'overweight' rating on Woodside shares.
At Monday's close, the Woodside share price was $32.83.
