Dividend Aristocrats In Focus Part 6: Chevron

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A handful of large, multi-national corporations dominate the energy industry. Only 2 are Dividend Aristocrats (S&P 500 stocks with 25+ years of rising dividends):

ExxonMobil is the largest publicly traded oil corporation based on its market cap.You can see detailed analysis of ExxonMobil here. Chevron is the 2nd largest oil corporation in the United States based on its $191 billion market cap and $105 billion in revenue over the last 12 months.

Both of these companies were born out of the split-up of Standard Oil in 1911. This makes them in some ways ‘sister companies’.

Long histories of rising dividends is something else these 2 oil behemoths have in common. Chevron has increased its dividend payments for 28 consecutive years (with a very small 29th increase expected soon). ExxonMobil has increased its dividend for 34 consecutive years. Chevron’s dividend history is shown below.

While Chevron’s dividend history is impressive, the past two years have not been kind to Chevron because of the huge decline in oil prices. Despite these declines, Chevron has still outperformed the market over the last decade.

As an integrated major, Chevron has a diversified business model which is helping blunt the blow of low oil and gas prices.

And, it has several major projects set to ramp up going forward. These will help the company remain profitable and protect its high dividend yield of 4.2%.

Keep reading this article to learn more about the investment prospects of Chevron stock.

Business Overview

Chevron is split up into two main business segments: Upstream and Downstream.

The upstream segment is composed of the company’s exploration and production activities. This business segment is reliant on supportive commodity prices. Not surprisingly, the upstream side of the business is getting hit hard by the decline in oil and gas prices over the past two years.

Chevron lost $1.9 billion in its upstream business in 2015, compared with a $16.9 billion upstream profit the year before.

The good news for Chevron is that its downstream segment helped offset some of these losses. Chevron’s downstream unit generated $7.6 billion of earnings last year, which was a 75% year over year increase. This is the biggest benefit of being an integrated major. When oil prices decline, upstream profits collapse. But the trade-off is that downstream profits typically increase during periods of falling oil prices. The downstream business includes refining, which actually benefits from lower oil prices because it reduces refining feedstock costs. A reduction in costs helps widen refining profit margins.