On the same day Exxon (NYSE:XOM) disappointed its shareholders with a poorly received earnings report, Chevron (NYSE:CVX) delighted its shareholders by announcing another dividend hike and demonstrated again why it should be a core holding for well diversified income investors.
- The company announced an 11% dividend hike to 90 cents per quarter, starting with the payment of June 11th to holders as of May 18th.
- With the new dividend, Chevron will now yield a little over 3.4% at current prices.
- Even with the dividend hike, the company's payout ratio is just a little over 27% based on FY2011's earnings.
- The company has now doubled its dividend payments since early 2006. It also has an AA rated balance sheet.
"Chevron Corporation, through its subsidiaries, engages in petroleum, chemicals, mining, power generation, and energy operations worldwide. It operates in two segments, Upstream and Downstream". (Business Description from Yahoo Finance)
4 reasons value investors should like Chevron at $105 a share:
- The stock has a forward PE of under 8, a discount to its five year average (9.3)
- The company is a cash flow machine. It more than doubled operating cash flow from FY2009 to FY2011 and sells for just 5 times operating cash flow.
- The median price target by the 17 analysts that cover the stock is $125 a share. S&P has its highest rating "Strong Buy" and a $132 price target on the stock.
- Consensus earnings estimates for FY2012 and FY2013 have risen smartly over the past two months.
Disclosure: I am long CVX.