June 14, 2021

Why Chevron Is a Top Pick for Dividend Investors

 

The company is on track to generate billions of dollars in free cash flow

  


Chevron reported strong first-quarter results, becoming one of the few oil companies to return to profitability.

 

Management seems committed to rewarding shareholders in the long run.

 

Favorable macroeconomic outlook and recent investments make Chevron an attractive bet for value and income investors.

 

Chevron Corp. (CVX) is an American integrated energy company operating in more than 180 countries. The company is active in hydrocarbon exploration and development, chemical and mining activities, power generation, refining and fuel transportation. It has an active portfolio of renewable assets, including geothermal, solar, wind, biofuel, fuel cells and hydrogen.

 

The energy giant seems to be recovering strongly from the oil market turmoil created by the global recession, which is evident from its strong first-quarter financial performance. Chevron posted a profit for the first quarter of 2021 and increased its dividend by 4%, becoming one of the very few oil giants to return to profitability. Chevron reported a substantial improvement in cash flows as well, driven by higher oil prices. Warren Buffett, the investing legend, is bullish about the company's long-term success due to its solid balance sheet and ability to produce consistent cash flows. In the fourth quarter of 2020, Berkshire Hathaway Inc. (BRK.A) (BRK.B) purchased 48.5 million shares of Chevron.

 

 

The outlook is promising for dividend investors

 

Chevron pays a quarterly dividend of $1.34 per share, which converts into an annual dividend yield of 5% at the current stock price of around $108. Although this is a very attractive yield in a low-interest rate environment, investors need to evaluate many factors, including the company's future cash flow generation ability and the executives' commitment to maintaining or improving the dividend per share. Chevron ticks all these boxes.

 

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