Why Chevron (CVX) is a Great Dividend Stock Right Now

All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Chevron in Focus

Headquartered in San Ramon, Chevron (CVX) is an Oils-Energy stock that has seen a price change of 4.77% so far this year. The oil company is paying out a dividend of $1.63 per share at the moment, with a dividend yield of 4.17% compared to the Oil and Gas - Integrated - International industry's yield of 2.55% and the S&P 500's yield of 1.6%.

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%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Chevron's current payout ratio is 46%, meaning it paid out 46% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, CVX expects solid earnings growth. The Zacks Consensus Estimate for 2024 is $13.56 per share, representing a year-over-year earnings growth rate of 3.27%.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide a quarterly payout.

High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that CVX is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).

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Chevron Corporation (CVX) : Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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