While there are plenty of dividend opportunities available in the oil patch, Chevron (CVX +0.60%) stands as one of the most popular options for income investors. From its lengthy record of boosting its distribution to the fact that Chevron has earned the Warren Buffett seal of approval (it's one of the largest holdings in the Berkshire Hathaway portfolio), there are a variety of reasons investors power their portfolios with the oil supermajor.
Despite these credits to its name, it's always important to remember to do some research -- paying particular attention to the dividend amount and the payout ratio.
NYSE: CVX
Key Data Points
Drilling down into Chevron's dividend
Demonstrating a steadfast commitment to rewarding shareholders, Chevron has hiked its dividend annually for the past 37 years. In each of the first two quarters of 2024, Chevron returned $1.63 per share to investors. If it maintains the same amount in the third and fourth quarters of the year, it will total $6.52 per share, and it will mean that it will have increased its dividend at a 4.8% compound annual growth rate (CAGR).
In 2023, Chevron booked net income of about $21.4 billion, and it recorded dividend payments of approximately $11.3 billion. This translates to a payout ratio of 53.2%. By expanding the outlook to the past three years, investors can gain greater perspective on Chevron's payout ratio, which averaged 49.8% from 2021 to 2023.
Should you grease the wheels of your passive income machine with Chevron right now?
Chevron has achieved an impressive feat in raising its dividend for 37 years, and there's good reason to believe that it will continue doing so in the foreseeable future. With regard to its upstream business, management forecasts boosting production at a more than 3% CAGR through 2027 due to increases in production from assets in the Permian Basin as well as the Gulf of Mexico.
As a premier oil dividend stock, its allure transcends its conservative payout ratio. And with shares trading at 7.7 times operating cash flow, today is a great day to consider fueling a portfolio with Chevron stock.
