Credit Suisse Slaps 'Top Pick' Tag On Chevron

| About: Chevron Corporation (CVX)

Credit Suisse came out with its top energy picks for 2014. Chevron (NYSE:CVX) was the top and only major domestic integrated oil concern that received the designation for the New Year. Credit Suisse also has a $140 a share price target on the stock, which represents a ~15% return from the current stock price before dividends.

Among the key reasons for the selection was the stock's 3.4% dividend yield. The energy giant is also benefiting from the huge oil & gas boom currently occurring in North America. The investment bank speculates Chevron might make a major domestic acquisition to boost its exposure to this production boom. I think, Anadarko Petroleum (NYSE:APC), which I profiled yesterday could fit that bill especially after stock's recent decline.

My current favorite large cap dividend paying energy concern continues to be ConocoPhillips (NYSE:COP). However, income investors looking to add some exposure to the energy sector should also consider Chevron as well. It is the type of "Blue Chip" dividend payer that I think will do well in what should be a more subdued market, as far as returns, in 2014.

Margins should improve a bit over the coming years as 2014 will represent a peak year for spending on its massive Australian liquefied natural gas projects as they move closer to starting production. The company's cap ex budget should fall some $2B overall to $41B in the coming year.

As previously stated, the shares yield over 3% and just as importantly the company has more than doubled its payouts over the past eight years. I would expect this kind of consistent dividend growth to continue into the foreseeable future.

The stock is not expensive at ~10x forward earnings. It is even cheaper on a cash flow basis where it goes for 6x trailing operating cash flow. Chevron also has a very solid balance sheet and has been slowly divesting itself of refining assets which should lower the volatility of earnings over time.

Chevron has S&P's highest rating "Strong Buy", which also has a $145 a share price target on the stock. In addition, the company has done a credible job of increasing its share of production coming from oil & liquids which now stands at 2/3's of overall production.

For investors who see a muted market in 2014 after 2013's impressive rally and want a stable dividend payer with a solid valuation; Chevron could fit the bill. ACCUMULATE

Disclosure: I am long APC, COP. 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.