ConocoPhillips (COP) stock currently offers a dividend yield of 3.42%, which is lower than its 5-year average. This discrepancy suggests that the stock has a potential price target of at least $126.65, representing a 29% increase from its current price of $98.19. Investors can capitalize on this opportunity by selling short out-of-the-money (OTM) put options and earning a monthly return of about 1.5%.
In the past month, COP has traded in a range between $90.16 and $100, closing at $98.19 on Friday, Jan. 16. Since Nov. 6, 2025, when ConocoPhillips raised its quarterly dividend by 7.69%, the stock has been steadily climbing. This increase in dividend yield compared to its historical averages indicates that COP may have a higher price target.
Analyses from various sources show that COP has had an average dividend yield of 2.53% over the last 5 years, with historical averages ranging from 2.29% to 3.14%. Taking the average of these figures, the 5-year average yield for COP is calculated to be 2.653%. Based on this average, the potential price target for COP is estimated to be $126.65, representing a 29% upside from the current price.
To play this potential upside, investors can sell short OTM put options with monthly expiry periods. By doing so, investors can earn a steady income while setting a lower potential buy-in point. For instance, selling the $92.50 put contract expiring on February 20 can provide an immediate yield of 1.762%. Additionally, selling the $90.00 put contract with the same expiry date offers a yield of 1.167%. By shorting both contracts, investors can earn an average yield of almost 1.50% over the next month.
Although there is a risk that COP may fall below the strike price of the put options, the income received from selling the puts can help lower the breakeven point for investors. Overall, selling short OTM puts in monthly expiry periods can be a conservative strategy to capitalize on the undervaluation of COP stock.
It is important to note that the information provided in this article is for informational purposes only, and readers should conduct their own research before making any investment decisions.
