I’m with analysts, this 6.4%-yielding passive income stock could surge 30% in a year

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Passive income is a dream of many. However, a substantial second income from my portfolio is only possible if I know the right shares to buy with strong growth prospects and big, sustainable dividend yields.

Oil investing

With conflicts escalating globally, finding ways to mitigate economic risks is essential. Oil remains a crucial resource, and Diamondback Energy (NASDAQ:FANG) could be a solid defensive play. The company operates almost entirely in the Permian Basin in the US, limiting its exposure to global supply chain disruptions. Additionally, geopolitical tensions often drive oil prices higher, potentially boosting Diamondback’s share value in times of conflict.

With a strong 6.35% yield right now, this is potentially an income investor’s dream. Furthermore, since 2012, the share price has risen 865% in price.

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While past returns are no guarantee of future results, I’m optimistic about the investment’s near-term future. In 2025, 15 analysts hold the consensus that the company will generate 44% revenue growth. Furthermore, the average 12-month price target from 27 analysts indicates a 31.5% gain. Largely, this is the result of a big merger under way between Diamondback and Endeavor Energy Resources.

However, looking a little further out, I’m expecting price volatility in 2026 and 2027, when analysts reckon the company could see a slight contraction in revenues. This will likely include integration challenges from the merger before more normal, moderate growth in the following years.

Through thick and thin

Warren Buffett famously taught us that the secret to investing success is to choose only a handful of investments throughout a lifetime. By being incredibly selective, we avoid rash decisions and ensure that the investments we make are of the highest quality.

Additionally, at The Motley Fool, we follow a long-term strategy. We’re all about finding companies to invest in and hold for 10 years or more, letting them grow over time.

I believe Diamondback Energy could be a strong long-term holding in a well-diversified portfolio. However, it’s important to note that the stock may face periods of significant price drops. To manage this, I would consider pound-cost averaging — regularly adding to my position, regardless of short-term valuations. This could smooth out market volatility over time. On the other hand, investing a large lump sum right now feels riskier, as Diamondback isn’t a growth stock, and its valuation is relatively high.

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Stable Texan oil prices

Diamondback Energy’s ability to maintain its dividend is closely tied to oil prices. If geopolitical tensions persist and supply chain disruptions continue, oil prices could stay elevated, enabling the company to generate strong free cash flow and comfortably support its dividend payouts.

Looking ahead, however, analysts predict some softening in oil prices. Currently, Permian Basin crude oil is priced around $71 per barrel, with forecasts suggesting a range of $60 to $79 per barrel by 2025 and 2026. This indicates that while the dividend remains stable for now, investors should keep an eye on potential price shifts. For income-seeking investors, Diamondback’s dividend might still offer a compelling opportunity in the near term.

I’m seriously considering adding Diamondback Energy to my portfolio as a way to hedge against current geopolitical uncertainties. With global instability, this may be a smart move to generate steady income from dividends while protecting my investments.

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