Image Source: Chevron investor presentation

Even though Big Oil companies are well known for their ability to invest consistently through the oil and gas cycle, they still go through phases of higher and lower spending. If we were to track the ups and downs of those investment cycles today, Chevron (NYSE:CVX) would be what you call the cycle laggard. While peers such as ExxonMobil (NYSE:XOM) and Total (NYSE:TOT) are starting to cash in on some of their projects, Chevron still needs to shovel money into major project developments. 

Because of Chevron's need to keep on spending and the low oil price environment we're in, some investors might be starting to wonder whether Chevron's status as a Dividend Aristocrat is at risk in 2016. So let's take a quick look at the biggest hurdle Chevron will need to overcome to raise its dividend in 2016, and what it has working in its favor to actually get it done. 

What puts the dividend at risk?
Of all the integrated oil and gas companies, Chevron is the most reliant on the exploration and production side of the business for its cash flows and earnings -- so of all the companies in the Big Oil space, Chevron looks to be the most likely candidate to not raise its dividend. 

It doesn't help that Chevron is also outspending its cash flows at a much higher rate than its peers. 

CompanyOperational cash flow as percent of capital spending (YTD 2015)
Chevron 67%
BP 98%
ExxonMobil  127%
Royal Dutch Shell 139%
Total 79%

Data source: S&P Capital IQ.

Coming up that short on the company's capital budget is forcing Chevron's management to take on debt and sell assets at a pretty decent clip to meet its capital expenditure and dividends.

Image source: Chevron investor presentation.

What makes it even more challenging for Chevron is that it still has some pretty large capital obligations to finish up a slew of projects that have not yet come online. By comparison, other larger spenders like Total have already started to wind down their capital spending this year; Total has brought several projects online.

What's working in Chevron's favor?
Yes, Chevron is more tied to the production side of the business, but it isn't wholly dependent upon it. So far this year, downstream operations have covered up losses from the upstream side of the business, so earnings stand at $5.7 billion. With oil prices remaining this low, Chevron still has the ability to keep leaning on its refining and chemical segments to prop up earnings and cash flows.

Another thing that will help the company's cause is the fact that some of the cost-cutting measures it took earlier in the year are starting to show in the income statement. So far this year, upstream operational costs are slated to be 13% lower than in 2014, and the company believes that through some of its recent restructuring efforts and service contract negotiations it will lower its operational costs by at least $4 billion.

In most of the recent conference calls, Chevron CEO John Watson has really gone out of his way to say that this will not compromise the company's finances over the long term. He has also said that the winding down of these major capital projects will result in a lot of budget flexibility starting in 2017, which will allow the company to cover any dividend payment with internally generated cash flow and no longer rely on other sources such as debt issuances or asset sales. 2016's capital budget is expected to be $7 billion-$10 billion less than 2015's, mostly as a result of some projects going operational.

What a Fool believes
Compared to the rest of the integrated majors, Chevron looks like it is not likely to raise its dividend. So if you are looking at adding a Big Oil company to your portfolio for a super-safe dividend, then you might want to consider looking at ExxonMobil. We need to keep that in context, though, because integrated oil and gas companies are some of the lowest-risk investments in the energy space because of their ability to generate cash throughout the cycle.

It doesn't look like the oil market is going to make it easy, but Chevron's management seems bound and determined to keep its dividend policy intact come hell or high water. So barring any unforeseen changes, it's pretty safe to say that 2016 will not be the year that we see Chevron break its dividend increases.