For investors seeking both growth and income, Chevron (NYSE:CVX) will not disappoint. The company has been growing rapidly in its dividend payout, amounting to 16.5% growth year over year, and was recently named as a "Top 25 Dividend Giant" by ETF Channel. The company provides a dividend of $3.60 per share, currently paid in quarterly installments.
Ranked as number two in the list of mega oil and gas companies, Chevron is a global leader in integrated oil and natural gas exploration and production, but its reach does not end there. The company also has major stakes in storage, refining, transportation, marketing and distribution through its Chevron, Texaco and Caltex brands and is active in coal and rare earth mining, chemicals and lubricants production, power, including geothermal power, and petrochemical technology. In all these areas, the company is productive and profitable, which is why I can highly recommend Chevron as one to buy and hold. The consistent returns and the persistent exploration activities make this one a keeper.
Though not quite to the size of Exxon Mobil (NYSE:XOM) Chevron is still a solid force in the oil and gas exploration world. The company has been increasing its distance from competitors like BP (NYSE:BP), Shell (NYSE:RDS.A), Anadarko Petroleum (NYSE:APC), Total (NYSE:TOT), and ConocoPhillips (NYSE:COP), making progress in new plays of both oil and gas and making investors happy.
The company's stock currently trades at a P/E ratio of 7 and for the first quarter of 2012, revenue was up 0.6% year-over-year to $60.7 billion and earnings were up 4.2% to $6.5 billion or $3.27 earnings per share from $6.2 billion in the first quarter of 2011. Much of this success can be contributed to the company's growth-oriented liquid natural gas (LNG) projects in Australia, and production from its deepwater wells in Nigeria and the Gulf of Mexico. This was not due to blind luck, but Chevron's keen use of capital expenditures, which increased to $6.4 billion from $5 billion in the year-ago quarter, with 92% of its capital invested in upstream activities.
Chevron is looking in all the right places for new plays in oil and gas as well as opening new creative opportunities using resources at hand. As an example, the company is showing interest in the Arenque Block, one of the matured oil fields off the coast of Mexico that is currently part of the state-run oil firm Petroleos Mexicanos's (Pemex) second contract auction. The Arenque Block was discovered in 1968 and is located in the shallow waters of the Gulf of Mexico. Chevron as well as Exxon Mobil had plays in Mexico until Pemex began its monopoly on Mexico energy exploration and production and the country nationalized assets from oil international firms. This auction is the second that Pemex has held since introducing the new contract regime, allowing private producers to develop Mexican oil fields for Pemex in exchange for a per-barrel fee.
Using the surplus of natural gas to be used, Chevron is finding new ways to put the gas to work. The company has a 1-hexene plant under construction that will use ethylene, a product of ethane and one of the largest components of natural gas, to create 1-hexene, an essential ingredient for a range of plastic products. Ethylene is a product of ethane, one of the largest components of natural gas.
The plant, Chevron Phillips Chemical, with a 50/50 ownership joint venture with Phillips 66 (NYSE:PSX), is located in the Cedar Bayou complex and will be the world's largest, benefiting from a surplus of cheap natural gas. Other projects in the works for Chevron Phillips Chemical include two new polyethylene units near its Sweeny plant in Old Ocean; a new ethane cracker at Cedar Bayou; and an increase of its fractionator that separates the individual components out of natural gas liquids at the Sweeny facility.
Natural gas plays a critical roll in the production of petrochemical products. With natural gas prices so cheap, the company is wisely using this commodity to its fullest potential. Chevron Phillips Chemical is also evaluating the feasibility of developing a petrochemical plant in Iraq. The company is contemplating building a new facility and upgrading an existing Iraq-owned petrochemicals factory in southern Basra province since Iraq holds the world's fifth-largest crude reserves and the fifth-biggest natural-gas deposits in the Middle East.
Year on year Chevron grew revenues 23.80% from $204.928 billion to $253.706 billion while net income improved 41.37% from $19.024 billion to $26.895 billion. The company derived 88% of its positive earnings from upstream activities and 12% from downstream activities. Though the company had a negative earnings impact of $504 million in the quarter because of higher environmental reserve expenses in the U.S., for first-quarter 2012, total earnings were $6.5 billion, up 4.2% over the first quarter of 2011 due to strong upstream U.S. profits and a 91.7% gain in downstream international earnings.
In 2011, the company increased its cash reserves by 12.83%, or $1.804 billion. The company earned $41.098 billion from its operations for a Cash Flow Margin of 16.20%. Additionally, the company used $27.489 billion on investing activities and also paid $11.772 billion in financing cash flows. At the end of the first quarter 2012, the company had cash of $18.9 billion, up a 19% over the quarter due to robust cash flow from operations. The company had total assets of $214.9 billion, debt of $9.3 billion that was down 8.6% in the quarter and stockholders' equity of $125.5 billion, up 3.4%.
Obviously, Chevron is a company that is a must to buy and to keep for a very long time. Investors who bought the company years ago have never regretted owning a piece of this diverse and innovative company.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.