Investors that are looking for exposure to the energy sector might want to consider Santos Ltd (ASX: STO) shares.
That's the view of analysts at Morgans, which have once again named the energy producer on the broker's best ideas list this month.
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What is the broker saying about Santos shares?
Despite outperforming the market this year, Morgans still sees plenty of value in Santos shares at the current level.
According to the note, the broker has an add rating and $8.75 price target on its shares.
Based on the current Santos share price of $7.48, this implies a potential upside of 17% for investors over the next 12 months.
Another positive is that the broker is expecting some attractive yields from its shares in the near term. It has pencilled in dividends per share of 34.2 cents in FY 2023 and 46.1 cents in FY 2024.
If this forecast proves accurate, it will mean dividend yields of 4.6% and 6.15%, respectively. This boosts the potential total 12-month return well beyond 20%.
Why is it an energy share to buy?
Morgans likes Santos due to the diversity of its earnings and its attractive growth profile. The broker explains:
The resilience of STO's growth profile and diversified earnings base see it well placed to outperform against the backdrop of a broader sector recovery. While pre-FEED, we see Dorado as likely to provide attractive growth for STO, while its recent acquisition increasing its stake in Darwin LNG has increased our confidence in Barossa's development.
PNG growth meanwhile remains a riskier proposition, with the government adamant it will keep a larger share of economic rents while operator Exxon has significantly deferred growth plans across its global portfolio.
