A Top Dividend Stock to Boost Your Passive Income
Chevron’s (NYSE: CVX) stock has surged 5.5% since reporting its third-quarter 2024 earnings on November 1, driven by solid results and a commitment to returning capital to shareholders through buybacks and dividends. The oil and gas giant is poised to pay out an impressive $11.8 billion in dividends this year, outpacing even stalwarts like Coca-Cola.
Why Chevron Stands Out
International energy companies may not control oil and gas prices, but they can optimize their production portfolios to ensure profitability even at lower prices. Chevron has been doing just that, with around 75% of its locations able to break even below $50 per barrel. This provides a comfortable margin for error, even in a lower oil price environment.
Improving Efficiency
Chevron’s asset sales in Canada, Congo, and Alaska are part of its plan to divest $10 billion to $15 billion by 2026, with further structural changes expected to reduce costs by $2 billion to $3 billion from 2024 to 2026. This could lead to an even lower breakeven point in the coming years. In the recent quarter, Chevron grew worldwide net oil equivalent production by 7%, thanks to higher U.S. and Permian Basin production.
Elite Upstream Portfolio
Chevron’s ability to generate substantial earnings and free cash flow even in a mid-cycle price environment showcases the strength of its upstream portfolio. The company’s free cash flow for the first three quarters of 2024 was $10.7 billion, demonstrating its ability to deliver solid results despite challenging market conditions.
Weathering the Storm
Like most oil and gas companies, Chevron’s profits evaporated during the COVID-19 downturn. However, the company not only maintained its dividend payments but also raised the payout, as it has done for 37 consecutive years. Chevron’s strong balance sheet enabled it to reward shareholders with buybacks and dividends while paying down debt.
A Compelling Investment Opportunity
With a 4.2% dividend yield, significantly above the S&P 500 average, Chevron offers an attractive income stream. The stock’s price-to-earnings ratio is under 16, making it a good value given the company’s financial health and growth prospects. Before investing, consider the benefits of adding Chevron to your portfolio: a stable and reliable dividend, a clear path toward future earnings growth, and a financially healthy company with a strong balance sheet.
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