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An experienced investor knows very well that nominal gains on his investments are not enough to preserve his savings. It is also essential to beat the inflation rate, which is the worst enemy to our savings. This is not such an easy task - even in periods of low inflation like we have these days, it is difficult to beat inflation because the current low interest rates are falling way behind the current rate of inflation.

In my previous article, I explained how to beat inflation by holding 3M Company (NYSE:MMM) stock for long periods, but 3M is not the only stock suitable for this kind of strategy. Chevron Corporation (NYSE:CVX) has shown even superior results.

In this article, I will show that holding Chevron stock for long periods had beaten inflation for each time-frame of 10 years. It had also outperformed the S&P 500 Index for all the time-frames of 10 years starting at the beginning of 1973. Although the past guarantees nothing, it does provide insight into how Chevron has performed under various economic conditions over varying time frames. All the data for this article was taken from Yahoo Finance and finviz.com.

Chevron Corporation, through its subsidiaries, engages in petroleum, chemicals, mining, power generation, and energy operations worldwide.

The two tables below present some important valuation metrics and dividend information.

Chevron Corporation daily chart

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Chart: finviz.com

Chevron Corporation long term price chart

CVX Chart

CVX data by YCharts

Chevron has a long history of steadily increasing dividend payments. The table and the charts below present the dividend rates, the dividend yields and the dividend rate of growth for the past five and 5 years, 10 years, 20 years and 40 years.

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CVX Dividend Yield Chart

CVX Dividend Yield data by YCharts

The table below presents the total return and the compound annual growth rate (OTCPK:CAGR) of holding the CVX stock for the last five years, 10 years, 20 years, 30 years and 40 years. The returns without dividends (capital gains) and with dividends are shown separately, in order to emphasize the importance of the dividend yield.

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Holding the CVX stock during the last five years has given an average annual return of 9.3%, while without the dividends the average annual return would be 6.7%. Holding the CVX stock during the last 10 years has given an exceptionally high average annual return of 17.3%, during the last 20 years a very high average annual return of 13.0%, and during the last 40 years a nice annual return of 12.1%.

The table below presents the average inflation rate and the S&P 500 index average annual capital gains for the last five years, 10 years, 20 years, 30 years and 40 years.

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The two tables clearly show that during all these periods, holding CVX stock has given a much higher average annual return than the inflation rate, and also has outperformed the S&P 500 index by a significant margin.

The table below presents the total return and the compound annual growth rate (OTCPK:CAGR) of holding the CVX stock for four time-frames of 10 years starting at the beginning of 1973.

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The table below presents the average inflation rate, and the S&P 500 index average annual capital gains for four time-frames of 10 years starting at the beginning of 1973.

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The two tables show that for the four time-frames of 10 years starting at the beginning of 1973, CVX stock outperformed the S&P 500 index. Holding CVX stock had also given much higher average annual return than the inflation rate in all the four time-frames of 10 years, even in the period of high inflation between 1973 to 1983 and of the 1973-1974 stock market crash.

Summary

The table below presents the compound annual growth rate (OTCPK:CAGR) of holding the CVX stock for the last five years, 10 years, 20 years and 40 years, and the average annual U.S. inflation rate during those periods, calculated by the CPI change. The average annual capital gains of the S&P 500 index are also shown.

(click to enlarge)

The table clearly shows that during all these periods, holding the CVX stock has given a much higher average annual return than the inflation rate and has outperformed the S&P 500 index by a big margin.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: Beating Inflation By Holding Chevron Corporation Stock For Many Years