Understanding Chevron’s Dividend Yield among the Top 10 Integrated Energy Stocks
Chevron’s dividend yield
Chevron (CVX) comes in seventh place among our top dividend-yielding integrated energy stocks. Chevron is an American integrated energy company with upstream and downstream business segments. The company’s market capitalization of ~$204 billion puts it in fourth place in size in our select group.
Chevron has a current dividend yield of 4.0%. In 3Q17, Chevron announced a dividend of $1.08 per share July 26, 2017, which will be paid on September 11, 2017.
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Chevron has paid dividends consistently for the past three years, and its dividends have actually risen during this period. Three years ago, Chevron made a dividend payment of $1.07 per share on September 10, 2014, while its stock price has fallen 17% since then.
Latest 1H17 earnings
In its 1H17 results, Chevron moved from a loss of ~$2.2 billion in 1H16 to a gain of ~$4.1 billion. This was due to an across-the-board rise in its segmental earnings. Its upstream segment, which reported a loss of ~$3.9 billion in 1H16, rose to ~$2.4 billion in 1H17, due to a rise in crude oil prices.
Chevron’s international upstream operations saw positive earnings in 1H17, compared with its negative earnings in 1H16, while its downstream earnings rose from ~$2.0 billion in 1H16 to $2.1 billion in 1H17.
Chevron is trading at a forward PE (price-to-earnings) ratio of 24.1x—above the average forward PE of 21.5x in our peer group. Chevron is trading at a forward EV-to-EBITDA (earnings before interest, tax, depreciation, and amortization) multiple of 7.1x, which is above the peer average of 6.2x.
The premium that the market is giving to Chevron stock is likely due to Chevron’s aim to survive the oil price cycle while preparing for future growth. Its robust upstream portfolio, its focus on the high-return downstream value chain, and its decent leverage position all attest to this.
Chevron is also set to benefit from any surge in oil prices, given its expanding upstream production. For more on this, please refer Market Realist’s series Chevron Revitalizing with Improving Financials, Outperforms SPY.