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Chevron: Is It A Good Dividend Stock?

Mar. 05, 2021 2:38 PM ETChevron Corporation (CVX)100 Comments


  • Many analysts forecast a surge in the price of crude.
  • Chevron's break-even figure to fund the dividend is $55 per barrel.
  • There are many positives in a prospective investment in CVX, and I provide evidence that crude price forecasts will likely miss the mark.

Stand aside, Exxon Mobil (XOM). Chevron Corporation (NYSE:CVX) now holds the title of the company with the lowest debt to equity ratio (.26) in its peer group. XOM in contrast has a ratio of .39X.

Chevron stole the crown despite a recent acquisition spree that resulted in an all stock transaction for Noble energy, followed by a proposed deal to gobble up what is left of Noble Midstream Partners (NBLX).

Many pundits believe the company will be well served by these acquisitions as they anticipate crude demand will rebound sharply once the COVID crisis passes. However, "a sharp rebound" is in the eye (or math) of the beholder.

Less than a month ago, the US Energy Information Administration (EIA) forecast average prices for Brent in 2021 at $56 a barrel through Q1, falling to $52 a barrel later in the year. The EIA projects average prices for WTI this year at $50.21 with 2022 bringing an average price of $51.56.

As we will see, there are many that disagree with the EIA predictions.

What we cannot dispute is that Chevron's revenue fell by over 30% YoY in the last quarter, and the company lost $5.5 billion for the full fiscal year.

Pundits Predict A Strong 2021 For Chevron Stock

Minor factors in the optimism voiced by many analysts are the synergies created by Chevron's acquisition of Noble Energy and the expected consummation of its deal with Noble Midstreams Partners.

Management anticipates $300 million in cost savings from Noble Energy as well as access to prime properties in the DJ and Permian Basins. The acquisition is expected to be accretive to free cash flow within a year after the deal closes.

Acquiring Noble Energy resulted in CVX owning a 62.5% interest in Noble Midstream. Buying the remainder of that company should reduce costs

This article was written by

Chuck Walston profile picture
Maximize your income with the world’s highest-quality dividend investments

As of 12/08/2022 I am rated among the top 2.8% of authors in terms of overall results. This is according to TipRanks, which provides a 63% success rate and an average 17.3% annual return for my articles. (I update this score on at least a quarterly basis for readers.)

I could be characterized as a safety first investor.  My primary focus is on dividend bearing stocks.  I seek a degree of safety in my investments by concentrating on companies with competitive advantages and strong balance sheets. 

I am a also value / buy and hold investor.   Since I require a discount in the share valuations of my investments, my  ratings are generally very conservative.  My valuation requirements, combined with the high quality companies that I often highlight mean many stocks I rate as a hold  perform well over the long term.   Readers should consider this when weighing my buy/hold/sell recommendations.  

I am a retail investor, with no formal training in investing.  

I am a graduate of the U.S Army Ranger school and a former member of the 1st Ranger Battalion and The Old Guard (U.S Army Honor Guard.) I am a retired law enforcement officer. I have approximately 20 years experience as a retail investor. 

Best of luck in your investments, Chuck

Analyst’s Disclosure: I am/we are long CVX. 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.

I have no formal training in investing. All articles are my personal perspective on a given prospective investment and should not be considered as investment advice. Due diligence should be exercised and readers should engage in additional research and analysis before making their own investment decision. All relevant risks are not covered in this article. Although I endeavor to provide accurate data, there is a possibility that I inadvertently relay inaccurate or outdated information. Readers should consider their own unique investment profile and consider seeking advice from an investment professional before making an investment decision.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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