Chevron (CVX 1.75%) has been an elite dividend stock for decades. The oil giant has increased its dividend for 38 straight years. It hasn't just been giving investors token raises to keep that streak alive. Chevron has grown its payout at a healthy 7% compound annual rate over the past quarter-century and at a peer-leading 5% compound annual rate over the last decade. That's impressive considering how volatile oil prices have been over the years.
The energy company is in a strong position to continue delivering healthy dividend growth through at least 2030. Here's a look at what fuels that view.
Image source: Getty Images.
Chevron's path to 2030
Chevron recently revealed its outlook through 2030. The oil giant anticipates delivering more than 10% annual growth in both its adjusted free cash flow and earnings per share through 2030. That outlook assumes Brent oil (the global benchmark price) will average around $70 a barrel. While Brent is currently below that level (it's in the mid-$60s), it has been at or above $70 for much of this year.
That's a robust growth rate for a company of Chevron's size. Of the 100 largest companies in the S&P 500, only 35 currently expect to deliver more than 10% annual earnings per share and free cash flow growth through 2027. Meanwhile, only nine of those companies are as financially strong as Chevron (a bond rating of AA- or higher). Chevron is the only company of that remaining group with a dividend yield above 4% (currently 4.5%). That places the oil giant in a class of its own due to its combination of growth, financial strength, and yield.
NYSE: CVX
Key Data Points
A look at what's fueling Chevron's plan
Chevron's five-year plan comes on the heels of a lot of hard work to transform the company into a free cash flow growth machine. Years of project execution and a series of strategic acquisitions, culminating in the acquisition of Hess this year, have enabled the energy company to build a resilient, world-class portfolio with a diverse set of growth drivers it expects to capitalize on over the next five years.
The bulk of its growth will come from its low-cost upstream oil and gas operations. Chevron has a long list of expansion projects under construction or in development. The company's acquisition of Hess provided it with a position in the prolific Stabroek Block offshore Guyana. The ExxonMobil-led joint development group (along with Chevron and China's CNOOC) started up its fourth development (Yellowtail) earlier this year. They have already approved three more projects (including the $6.8 billion Hammerhead project in September of this year), which will come online through 2029. They have one more project in the pipeline (Longtail) that they anticipate bringing online by 2030.
Guyana isn't Chevron's only growth driver. The company also has projects underway or in development offshore Africa, in the Mediterranean, and the Gulf of Mexico (also known as the Gulf of America in the U.S.). Additionally, the company has a couple of downstream projects under construction that should start up in 2027 (a petrochemical project in Qatar and a polymers project in the U.S.).
Chevron is also building out several new energy platforms to complement its legacy fossil fuels businesses. It's building a green hydrogen project in the U.S. and an oilseed processing plant for biofuels. Additionally, it's developing a couple of carbon capture and storage hubs, a lithium project, and gas-fired power solutions for AI data centers.
The company's well-rounded approach helps reduce risk while putting it in a strong position to deliver on its growth forecast.
Ample fuel to continue growing its high-yielding dividend
Chevron is a rare company that provides investors with both robust growth and income. While oil prices can be volatile, the company has a well-protected downside due to its diversification, low breakeven level ($50 a barrel for its dividend and capital spending program), and elite balance sheet. Meanwhile, it has substantial upside potential due to its robust growth outlook, which should provide it with ample fuel to continue growing its dividend at a healthy rate. That growth and income combination could give Chevron the fuel to produce robust total returns over the next five years, making it an excellent stock to buy and hold through at least 2030.
