This Unstoppable Dividend Aristocrat Is 2022's Best-Performing Dow Stock (and It's Not Even Close)

We're not even four months into the year. Yet already, Chevron (CVX 1.04%) stock is up 46% year to date (YTD) -- much higher than any of the other 29 components in the Dow Jones Industrial Average (DJIA -0.31%).

High oil and gas prices tell only part of the story behind Chevron's success. Here's what separates Chevron from other oil and gas stocks and why it's still a buy despite its stock price hovering right around an all-time high.

Image source: Getty Images.

Performance of the Dow stocks in 2022

The DJIA has spent years underperforming the S&P 500 and the Nasdaq Composite. And although the index is down 4.9% YTD, that's better than both the S&P 500 and the Nasdaq Composite, which are down 6.7% and 12.8%, respectively. 

Fifteen of the DJIA components -- exactly half -- are outperforming the index so far this year while the other 15 are underperforming. Here's a breakdown by company.

Data source: YCharts.

Investors will quickly notice that the stocks that have carried the broader market higher over recent years, such as Apple, Microsoft, Salesforce, Nike, and Home Depot, are all down YTD -- whereas companies in the energy, industrials, materials, and consumer staples sectors are doing quite well.

A well-rounded oil and gas giant

Chevron has a reputation for having the best balance sheet of the integrated oil majors, especially over the last five years or so as its capital expenditures have dramatically decreased.

CVX Financial Debt to Equity (Quarterly) data by YCharts

Chevron has lower financial-debt-to-equity and debt-to-capital ratios than ExxonMobil, BP, Shell, and TotalEnergies -- which is a sign that its capital structure is less dependent on debt than those of its peers.

The Chevron of today is a lean oil major focused on achieving a low cost of production so it can generate positive free cash flow even when oil is in the low $40s per barrel. That strategy was put to the test in 2020 when West Texas Intermediate crude oil averaged $39.17 per barrel for the year. Sure enough, Chevron lost billions. But it suffered less than its peers.

CVX Net Income (Annual) data by YCharts

A strong performer during good times and bad

Chevron stock is a few percentage points off its all-time high as oil and gas prices show no signs of going down anytime soon. Russia is one of the largest oil-and-gas-exporting nations in the world along with Saudi Arabia and the United States. But the war in Ukraine has led many European countries and the U.S. to either flat-out ban Russian energy imports or begin swiftly working toward solutions to wean themselves off Russian imports -- such as by constructing liquefied natural gas import terminals in Europe.

If oil and gas prices stay high, Chevron will continue to have outsize profits. But even if prices fall, Chevron has a wide margin of error where it can still do incredibly well. This efficient portfolio is one of the reasons Chevron is a Dividend Aristocrat and can support its growing dividend and stock repurchases. (A Dividend Aristocrat is an S&P 500 component that has paid and raised its dividend for at least 25 consecutive years.)

Chevron's upside potential and 3.4% dividend yield give it a one-two punch for long-term investors who like a financially strong company and are also interested in generating passive income.