Dividend Analysis: Chevron Corporation (CVX)

By: ispeculatornew
Date posted: 04.14.2011 (5:00 am) | Write a Comment  (0 Comments)

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Earlier this week, we did a detailed analysis of Intel Corporation (INTC) in order to see if it could be a solid part of a passive income dividend portfolio. The results were impressive and it’s one of the most impressive results that I have gotten since starting to look at dividend stocks. Obviously, I still need to find many high quality dividend stocks and today I take a look into one of the more solid picks in the commodity sector, specifically an oil play. Oil is often deemed as being “dirty” and on its way out but the reality is that the global economy depends on oil and that is unlikely to change for a very long time. Companies like Exxon and Chevron are not only formidable companies but they are likely to remain critical for decades to come.

While such companies require important investments, they generate so much cash that they are able to reward their shareholders with dividends making them very good candidates.

Without further wait, let’s take a deeper look into Chevron Corporation (CVX) as a dividend stock based on the 20 things that we consider when analyzing dividend stocks.

Dividend Metrics

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The yield over 3% with solid dividend growth over both 1 and 5 years is impressive and from the chart I think it’s fair to say that Chevron has been a solid dividend play for over 2 decades now!

Company Metrics

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Considering the size of the company, the sales growth over 1 year seems like an anomaly and the 5 year rate of about 2% seems more realistic but I personally am a bit disappointed by the slow growth rate. It is positive but if it cannot accelerate it will be difficult for CVX to keep the dividend increasing at the same pace it has recently.  That being said, the P/E ratio seems reasonable, the margins growth is good and it’s always a great sign to have a company with virtually no debt and a payout ratio under 30%.

Stock Metrics

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No doubt, momentum is quite strong for Chevron…!

Industry Metrics

The one worrying trend for energy companies remains the fact that they will eventually run out of oil but that seems to be a lifetime away at this point and Chevron as have others has been getting prepared for the “after oil” era.. I do not see this as a significant issue at this point. Another significant point is that these companies have significant power in the US government that helps them maintain their “power”. I think it’s definitely a great idea to have some of your investments in the energy field.

I think that while it’s unlikely, it’s important to consider the fact that energy companies operate in a risky environment where errors can be extremely expensive. Exxon and BP have both suffered massive disasters that have had a huge impact on the companies, their shareholders and the dividend payments. It’s not a likely possibility but it must be considered.

Fit within your portfolio

No doubt, Chevron can be a good fit but it might be a good idea to add when you have strong growth but less stable companies. Chevron has tremendous assets and can be a rock within your portfolio.


So no, Chevron did not do as well as Intel (INTC) in my opinion in this analysis but I still think that it’s a solid stock to be included in most dividend stock portfolios.

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