Over the past few weeks I've been working my way through the nine dividend aristocrats on the Dow Jones Industrial Average (^DJI 0.34%), and today we'll look at Chevron (CVX 0.98%). The company's consecutive dividend streak started back in 1988, and its $4.00 dividend gives the stock a current yield of 3.50%, the third highest on the index.

So how did we get here? Well, Chevron is the Dow's youngest dividend aristocrat. Before 1988, Chevron made a number of consecutive quarterly dividend payments of $0.15, but the payout has increased every year since then, up to its current quarterly dividend of $1.00. It's been a slow but steady climb over the past 26 years:

CVX Dividend Chart

CVX Dividend data by YCharts.

Chevron has a stable business, and economists think demand for its key product will continue to rise, so a future chart of Chevron's dividend increases and payments will look very similar to the one you see up above. So the next question for investors is how well the stock price has appreciated over the past few years.

Since late February 1988, the stock is up more than 896%, or 9.2% annualized without reinvestment of dividends. Adding in dividends improves the performance to 2,455%, or an annualized return of 13.3%. Over the past 26 years, the S&P 500 has returned 587%, annualized at 7.69%, without dividends reinvested, so even if you didn't reinvest your Chevron dividends, you still would have outperformed the S&P over that period.

But will Chevron still be a good buy going forward? Let's look at what investors should be watching.

Over the next 30 years, economists estimate that world energy consumption will increase by 56%, and fossil fuels are projected to supply almost 80% of the world's energy through 2040. Fossil fuels are Chevron's bread and butter, meaning demand for its product will keep rising. But there's a finite supply of oil and gas, and what's left is often hard to access. That has already started causing problems for Chevron and will probably continue to bring new challenges in the coming years.

Rising costs for exploration and drilling could also weigh on the company's margins and profitability in the future, because as costs go up, Chevron can't just start charging more for its oil, since oil is traded as a commodity -- meaning the company doesn't set the price; the market does.

Investors should also keep an eye on oversupplies of oil or gas on the market. When we began finding natural gas in abundance in the U.S., the price of the commodity fell through the floor. A number of smaller businesses have since pulled out of the industry because they couldn't make a profit. It's unlikely, but the same thing could happen to Chevron if the company doesn't stay vigilant.

Finally, while Chevron currently pays out just 35% of its profits in the form of a dividend, the industry requires heavy investing and a large amount of free cash. So for Chevron's industry, 35% is a safe place to be, and investors will be well served if the company can can continue to grow profits and free cash flow, so that Chevron can raise its dividend without increasing the payout ratio. On the other hand, even if Chevron falls on hard times, it could manage to raise both the dividend and payout ratio without causing substantial harm, as long as management reinvests back into the business through research and development projects.

Final thoughts
Chevron is a great company that's not going anywhere. There are some long-term concerns about the industry, and none of our analysis takes into account unforeseen events like a massive oil spill. As we saw with BP following the Deepwater Horizon disaster, those events can be devastating to a company and its dividend. These are things that investors in oil and gas companies always need to keep in mind. There are risks in these investments, but with big risk comes big potential reward. That's true for Chevron as much as for any of its peers.