On Jan. 25, 2023, Chevron (CVX -0.84%) announced its 36th consecutive annual dividend raise when it boosted its dividend by 6%. Investors were hoping for another raise in the Feb. 2, 2024, fourth-quarter earnings release -- and they got just that.
Chevron announced an 8% dividend raise lifting the payout to $1.63 per share per quarter -- or $6.52 per share per year.
Here's a look at Chevron's history of dividends, why this raise is meaningful, and why the dividend stock is a good value.
Image source: Getty Images.
Big oil, big-time raises
Companies with a long track record of dividend growth will sometimes make minuscule raises just to keep the streak alive. Chevron is not doing that.
Five years ago, its quarterly dividend was $1.19 per share. Now at $1.63, it is up 37% in that time period. Chevron has increased its dividend at more than double the rate of ExxonMobil and more than the other oil majors.
Chevron's dividend has been a key part of the reason it hasn't been too bad an investment over the last decade. The energy sector did very well in 2021 and 2022. But zoom out, and it is flat over the last 10 years despite the S&P 500 nearly tripling.
The stock is only up 36.4% over the last decade, largely helped by its strong performance over the last three years. However, once you factor in dividends, an investment in the stock would have more than doubled your money during that period.
It still would have been better to invest in the broader market. But when you consider the performance of the broader industry, how the oil and gas industry crashed in 2015 and then again in 2020, and the outperformance by big tech stocks to carry the S&P 500, Chevron's 107.5% total return over the last decade is solid.
The pillars that make Chevron a quality investment
There are two ways to grow earnings per share (EPS). The first is to increase earnings through organic growth, cost reductions, mergers and acquisitions, and the like. The second is by repurchasing stock and reducing the outstanding share count.
Chevron just reported its second-best year in diluted EPS over the last decade thanks to oil prices, cost reductions, operational improvements, and a strong overall portfolio both upstream and downstream. But another factor was its buybacks.
The company spent $14.9 billion in buybacks last year and $11.3 billion in 2022. That's $26.2 billion combined in just two years, which is 9.3% of Chevron's market cap.
And then, you have to factor in dividends. Management paid $22.3 billion in dividends in 2022 and 2023. So all together, it spent $48.5 billion on dividends and buybacks over the last two years, or 17.2% of its market cap.
Chevron's improving fundamentals, strong dividend, and sizable buybacks all play into why it is a good value. The stock has a price-to-earnings (P/E) ratio of just 11.3, far below the S&P 500 average. In fact, Chevron's earnings could be cut in half, and it would still have a lower P/E ratio than the S&P 500's 26.9.
Another key element of Chevron's value is its balance sheet. On the 2023 fourth-quarter earnings call, chief financial officer Pierre Breber said:
In terms of how we manage the balance sheet, I mean, the first thing is, we start with our breakeven. So, what it takes -- the oil price it takes to cover our capex and dividend -- that was in the low 50s last year. And so, we see mostly upside. And that's why we had record share buybacks last year, almost $15 billion, 5% of our shares outstanding, because we're built for a price well below where we currently are. We've also done it while maintaining a strong balance sheet -- our net debt ratio of 7%.
In other words, the company isn't just buying back stock for the sake of it. It is doing so because the balance sheet is already in such good shape and the portfolio has a low cost of production -- so the best use of cash is to buy back stock.
Chevron offers plenty of upside potential
Chevron checks all the boxes for a quality dividend stock. It is steadily growing its production -- mainly through low-cost plays. It has the balance sheet and track record to support future growth. It is an industry-leading company with diverse geographic exposure, as well as significant downstream assets. And it is a bargain-bin stock with a low valuation, which is impressive considering the stock is up 74.9% over the last three years and has beat the market during that time period.
If you're going to invest in the oil and gas industry, you want to find a company that can profit during an expansion and not go belly up during a downturn in the cycle. Chevron is that kind of company. Its 4.3% dividend yield provides a sizable passive income stream for investors who can stomach the volatility of the oil and gas industry.
Daniel Foelber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends BP and Chevron. The Motley Fool has a disclosure policy.
Five years ago, its quarterly dividend was $1.19 per share. Now at $1.63, it is up 37% in that time period. Chevron
Chevron
Chevron manufactures and sells fuels, lubricants, additives, and petrochemicals, primarily in Western North America, the US Gulf Coast, Southeast Asia, South Korea and Australia. In 2018, the company produced an average of 791,000 barrels (125,800 m3) of net oil-equivalent per day in United States.
https://en.wikipedia.org › wiki › Chevron_Corporation
“U.S. production was up 35 percent from a year ago, and we continued to meet major project milestones.” Chevron's return on capital employed in the first quarter 2024 was greater than 12 percent, as the company increased its dividend per share payout by 8 percent from fourth quarter 2023 and repurchased nearly $3 ...
Companies don't have to issue dividends, but many do as a way of rewarding and enticing investors. You can create passive income from dividends by investing directly in dividend stocks or by investing in dividend mutual funds and exchange-traded funds (ETFs).
Dividends are payments a company makes to share profits with its stockholders. They're one of the ways investors can earn a regular return from investing in stocks. Dividends can be paid out in cash, or they can come in the form of additional shares. This type of dividend is known as a stock dividend.
The average dividend yield on S&P 500 index companies that pay a dividend historically fluctuates somewhere between 2% and 5%, depending on market conditions. 7 In general, it pays to do your homework on stocks yielding more than 8% to find out what is truly going on with the company.
Taking a look at the company's dividend growth, its current annualized dividend of $6.52 is up 7.9% from last year. Over the last 5 years, Chevron has increased its dividend 4 times on a year-over-year basis for an average annual increase of 6.06%.
In a market that generates a 2% annual yield, you would need to invest $600,000 up front in order to reliably generate $12,000 per year (or $1,000 per month) in dividend payments.
Earning $2,000 in monthly passive income sounds unbelievable but is achievable through dividend investing. However, the investment amount required to produce the desired income is considerable. To make $2,000 in dividend income, the investment amount and rate of return must be $400,000 and 6%, respectively.
Making $4,000 a month based on your investments alone is not a small feat. For example, if you have an investment or combination of investments with a 9.5% yield, you would have to invest $500,000 or more potentially. This is a high amount, but could almost guarantee you a $4,000 monthly dividend income.
Once you have $1 million in assets, you can look seriously at living entirely off the returns of a portfolio. After all, the S&P 500 alone averages 10% returns per year. Setting aside taxes and down-year investment portfolio management, a $1 million index fund could provide $100,000 annually.
A well-constructed dividend portfolio could potentially yield anywhere from 2% to 8% per year. This means that to earn $3,000 monthly from dividend stocks, the required initial investment could range from $450,000 to $1.8 million, depending on the yield.
Over time, the cash flow generated by those dividend payments can supplement your Social Security and pension income. Perhaps, it can even provide all the money you need to maintain your preretirement lifestyle. It is possible to live off dividends if you do a little planning.
Dividend: Increased dividend payout by 8% from the previous quarter, with a quarterly dividend declared at $1.63 per share. Share Repurchases: Nearly $3 billion in shares repurchased during the quarter.
Chevron Corporation ( CVX ) dividend payments per share are an average of 6.76% over the past 12 months, 6.08% over the past 36 months, 6.25% over the past 60 months, and 4.41% over the past 120 months.
San Ramon, Calif., April 26, 2024 – Chevron Corporation (NYSE: CVX) reported earnings of $5.5 billion ($2.97 per share - diluted) for first quarter 2024, compared with $6.6 billion ($3.46 per share - diluted) in first quarter 2023.
Chevron price started in 2024 at $149.16. Today, Chevron traded at $165.45, so the price increased by 11% from the beginning of the year. The forecasted Chevron price at the end of 2024 is $185 - and the year to year change +24%. The rise from today to year-end: +12%.
Address: 55021 Usha Garden, North Larisa, DE 19209
Phone: +6812240846623
Job: Corporate Healthcare Strategist
Hobby: Singing, Listening to music, Rafting, LARPing, Gardening, Quilting, Rappelling
Introduction: My name is Foster Heidenreich CPA, I am a delightful, quaint, glorious, quaint, faithful, enchanting, fine person who loves writing and wants to share my knowledge and understanding with you.
We notice you're using an ad blocker
Without advertising income, we can't keep making this site awesome for you.
