Devon Energy offers investors a good dividend at a big discount. Bears frown on its multibasin, multiresource story, but Devon’s gas exposure should help it in the long term, and we like the upside from the just-closed Coterra deal’s cost savings, as well as management’s execution and capital return record. The company recently increased its quarterly dividend to USD 0.32 per share from USD 0.24. This undervalued dividend stock is trading at a 21% discount to our USD 55 fair value estimate. Devon was one of Morningstar Chief US Market Strategist Dave Sekera’s high-conviction stocks to buy on a recent episode of The Morning Filter podcast. It’s also among our analysts’ top stock picks for the third quarter.
Devon Energy is among the lowest-cost providers on the US shale cost curve. Its reconstituted portfolio is buoyed by its presence in the Permian’s Delaware Basin, which has some of the lowest breakeven costs among US basins. About two-thirds of the company’s production is tied to this premier asset, which helps Devon command favorable well production relative to peers. We expect management to continue allocating capital here; it signaled that over 50% of its roughly USD 3.6 billion in capital expenditure will be allocated to the Delaware in 2026. But Devon is more than just a single-basin play. It has a meaningful presence in four of the top five US shale basins by lowest breakeven costs.
Key Morningstar Metrics for Devon Energy
- : USD 55.00Fair Value Estimate
- : ★★★★Star Rating
- : NarrowEconomic Moat Rating
- : HighUncertainty Rating
Economic Moat Rating
We think Devon has a narrow economic moat based on cost advantage. It maintains its cost advantage primarily through access to low-cost resources with intrinsically low extraction costs. We think low-cost exploration and production companies—those that maintain production costs well below the industry’s long-term marginal costs—can command an advantage over their higher-cost counterparts. Devon’s breakeven oil price of just under USD 44/barrel falls well below our estimated marginal cost of production at USD 65/bbl Brent and is roughly in line with the independent group average of over USD 44.50/bbl.
Read more about Devon’s moat rating.
Fair Value Estimate for Devon Stock
Our fair value estimate is USD 55 per share, with the Coterra deal adding roughly USD 4 per share. Our fair value estimate corresponds to enterprise value/EBITDA multiples of 4.0 times for 2026 and 6.7 times for 2027. Our production forecast for 2026 totals 846 thousand barrels of oil equivalent per day, which is expected to drive 2026 EBITDA of approximately USD 10.8 billion. We expect free cash flow to be around USD 5.5 billion in the same period. Our 2027 estimates (excluding Coterra’s contribution) are approximately 841 mboe/d of production, USD 6.5 billion of EBITDA, and USD 2.6 billion of free cash flow.
Read more about Devon’s fair value estimate.
Risk and Uncertainty
Like most E&P companies, Devon faces significant risk from volatile oil and gas markets. A deteriorating outlook for oil and natural gas prices would pressure profitability, reduce cash flows, and drive up financial leverage. An increase in federal taxes or a revocation of the intangible drilling deduction enjoyed by US companies could also affect their profitability and reduce our fair value estimate. In this industry, the most significant environmental, social, and governance exposures are greenhouse gas emissions (both from extraction operations and downstream consumption) and other emissions, effluents, and waste (primarily oil spills).
Read more about Devon’s risk and uncertainty.
Devon Bulls Say
- Devon enjoys ideally located acreage in core portions of the basins it operates in. This translates to above-average well performance and peer-leading supply costs.
- A shareholder-friendly capital allocation plan opens the door for substantial returns to shareholders via base dividends, variable dividends, and opportunistic buybacks.
- By capping growth at 5% annually, Devon avoids the risk of overspending during upcycles, a common fault of many upstream companies.
Devon Bears Say
- After incorporating sunk costs from leaseholds, acquisitions, exploration, and infrastructure, Devon’s capital base inflates to a level that could threaten excess returns.
- Devon’s profitability in the Permian can’t be matched in other parts of the portfolio.
- Production growth could periodically outpace midstream capacity additions in the Permian, creating bottlenecks.
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This article was compiled by Susan Dziubinski and Sylvia Hauser. Data as of July 14, 2026, close unless otherwise noted.
