Shares of Exxon Mobil Corp. /zigman2/quotes/204455864/composite XOM -2.49% gained 0.9% in morning trading Monday, after Morgan Stanley analyst Devin McDermott turned bullish on the oil giant, saying spending reductions and a recovery in margins has pushed free cash flow above Wall Street expectations. McDermott raised his rating to overweight, after being at equal weight since April 2019, while lifting his stock price target to $57 from $49. He expects Exxon Mobil's dividend yield, which is currently among the highest of its large-capitalization peer group at 7.61%, to decline, as improved financials reduces concerns of a dividend cut, and helps correct years of stock price underperformance that in effect lowers the dividend yield but supports greater total investment return. The SPDR Energy Select Sector ETF's /zigman2/quotes/206420077/composite XLE -2.37% implied dividend yield is 5.16%, while Exxon Mobil's stock has shed 33.8% over the past 12 months and the energy ETF has lost 30.9%. "With the dividend and [capital expenditures] organically covered this year for the fist time since 2018, we expect outsized yield compression vs. peers as energy markets recover post-COVID," McDermott wrote in a note to clients. He said Exxon Mobil is now his "top pick" over Chevron Corp. /zigman2/quotes/205871374/composite CVX -2.30% , after previously preferring Chevron over Exxon Mobil for the past several years.