Is Chevron's 4.8% Dividend Yield Enough to Drive a Buy?
CVX, XOM, SHEL Dividend Yields
Backed by a rock-solid balance sheet, low net debt, and an investor-friendly capital return strategy, Chevron certainly appeals to income-focused investors seeking stability. However, its shares have declined modestly over the past few years, while the broader market has seen significant gains during the same period. This raises a crucial question: Is Chevron's dividend alone a good enough reason to buy CVX?
At first glance, Chevron's dedication to returning money to its shareholders is clear. The company handed out $27 billion in dividends and buybacks in 2024 and aims for $10-$20 billion in annual share repurchases. Yet, a closer look reveals some concerns. Chevron's earnings per share (EPS) are expected to go down this year before bouncing back in 2026. Plus, a high dividend payout ratio of 74 raises questions about its sustainability, especially if energy markets stay under pressure.
With wider economic challenges, increasing needs for reinvestment, and shifts in its production mix, the outlook for Chevron isn't entirely bullish, but it's not bearish either. Let's dig a bit deeper into Chevron.
Chevron's Dividend Strength Trusted by Income Investors
There is no doubt that Chevron's dividend is among the most reliable in the energy sector. The company hasn't cut its payout in 90 years and has raised it at a compound annual growth rate (CAGR) of over 6% for the past five years. In Q1 2025 alone, Chevron returned $6.9 billion to its shareholders, including $3 billion in dividends. Even with volatile commodity prices, Chevron expects to maintain its yearly buyback target, showing confidence in its cash-generating ability.
Compared to ExxonMobil and Shell, Chevron's dividend looks particularly attractive in terms of raw yield. However, ExxonMobil's lower payout ratio (53) and focus on long-life projects like Guyana and LNG offer more cushion for dividend growth. Shell, on the other hand, is still recovering after cutting its dividend in 2020 but has made its energy transition strategy a priority. Chevron stands out for its dividend stability, but maintaining the current trajectory could be challenging if earnings remain under pressure.
Investors should know that while Chevron's dividend hasn't seen a cut in nearly a century, there have been periods where growth was paused. For instance, between 2014 and 2017, Chevron went 10 straight quarters without raising its payout during an oil downturn.
CVX's Earnings Outlook: Near-Term Dip Followed by Recovery
Chevron's EPS trends tell a mixed story. After a strong 2024, Chevron's EPS is forecast to fall 32% in 2025. The main reasons? Lower commodity prices, the loss of cash-rich Venezuelan oil a downtrend in refining margins, and a growing reliance on short-cycle assets like the Permian. While flexible, these Permian assets demand constant reinvestment. However, a projected 27% rebound in 2026 suggests the earnings slump for Chevron might be temporary, boosted by increased output from the Tengiz project and efficiency gains in the Permian.
This unpredictable EPS path mirrors challenges faced by Chevron's industry peers. Even ExxonMobil has had to heavily rely on its long-cycle assets to navigate downturns, while Shell continues to balance optimizing fossil fuels with expanding clean energy. The key difference for Chevron is that its shorter-cycle focus might amplify earnings volatility more than its rivals.
Chevron's Lagging Stock Performance
It's impossible to ignore Chevron's lackluster share performance. While ExxonMobil is up 23% and Shell is up 36% over the last three years, CVX has actually lost 2%. This lag reflects a combination of broader economic headwinds and company-specific pressures, including the loss of Venezuelan production and growing concerns from the Hess arbitration. While Chevron's dividend has provided some protection against downside, total returns from Chevron simply haven't kept pace with broader markets — or even its sector peers.
CVX, XOM, SHEL 3-Year Stock Performance
Conclusion
Chevron offers one of the most dependable dividends in the market, boasting nearly 5% backed by four decades of consecutive growth and a strong balance sheet. However, a near-term decline in EPS, a high payout ratio, and recent underperformance suggest that Chevron's stock isn't without risks. The expected earnings rebound in 2026 provides some optimism for Chevron, but the path to get there includes its share of challenges.
CVX currently carries a Zacks Rank #3 (Hold), reflecting balanced risk-reward dynamics. For income-focused investors, Chevron remains a credible hold with defensive appeal. But for those seeking significant capital appreciation, it might be wise to wait for clearer signals of sustained earnings recovery or a re-evaluation of Chevron's stock price.
While Chevron's dividend hasn't seen a cut in nearly a century, there have been periods where growth paused. A repeat scenario isn't out of the question, especially given the current economic climate for Chevron.
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Only $1 to See All Zacks' Buys and Sells
We're not kidding.
Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.
Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators, and more, that closed 256 positions with double- and triple-digit gains in 2024 alone.
See Stocks Now >>
Chevron Corporation (CVX): Free Stock Analysis Report
Exxon Mobil Corporation (XOM): Free Stock Analysis Report
Shell PLC Unsponsored ADR (SHEL): Free Stock Analysis Report
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Globe and Mail
2 hours ago
- Globe and Mail
Microsoft cutting 9,000 jobs with largest layoff in years
Microsoft MSFT-Q says it is laying off about 9,000 workers, its second mass layoff in months and its largest in more than two years. The tech giant began sending out layoff notices Wednesday that hit the company's Xbox video game business and other divisions. Among those losing their jobs are 830 workers tied to Microsoft's headquarters in Redmond, Washington, according to a notice sent to state officials Wednesday. Microsoft said the cuts will affect multiple teams around the world, including its sales division, part of 'organizational changes' needed to succeed in a 'dynamic marketplace.' The company won't say the total number of layoffs except that it was about 4 per cent of the workforce it had a year ago. A memo to gaming division employees Wednesday from Xbox CEO Phil Spencer said the cuts would position the video game business 'for enduring success and allow us to focus on strategic growth areas.' Xbox would 'follow Microsoft's lead in removing layers of management to increase agility and effectiveness,' Spencer wrote. Microsoft employed 228,000 full-time workers as of June 2024, the last time it reported its annual headcount. Its latest layoffs would cut fewer than 4 per cent of that workforce, according to Microsoft. But it has already had at least three layoffs this year and it's unlikely that new hiring has matched the amount lost. Either way, a 4 per cent cut would amount to somewhere in the range of 9,000 people. Until now, this year's biggest layoff was in May, when Microsoft began laying off about 6,000 workers, nearly 3 per cent of its global workforce and its largest job cuts in more than two years. The cutbacks come as Microsoft continues to invest huge amounts of money in the data centers, specialized computer chips and other infrastructure needed to advance its AI ambitions. The company anticipated those expenses would cost it about US$80-billion in the last fiscal year. Its new fiscal year began Tuesday. Microsoft just last month cut another 300 workers based out of its Redmond headquarters, on top of nearly 2,000 who lost their jobs in the Puget Sound region in May, most of them in software engineering and product management roles, according to information it sent to Washington state employment officials. Microsoft's chief financial officer Amy Hood said on an April earnings call that the company was focused on 'building high-performing teams and increasing our agility by reducing layers with fewer managers.' The company has repeatedly characterized its recent layoffs as part of a push to trim management layers, but the May focus on cutting software engineering jobs has fueled worries about how the company's own AI code-writing products could reduce the number of people needed for programming work. Microsoft CEO Satya Nadella said earlier this year that 'maybe 20, 30 per cent of the code' for some of Microsoft's coding projects 'are probably all written by software.' The latest layoffs, however, seemed centered on slower-growing areas of the company's business, said Wedbush Securities analyst Dan Ives. 'They're focused more and more on AI, cloud and next-generation Microsoft and really looking to cut costs around Xbox and some of the more legacy areas,' Ives said. 'I think they overhired over the years. This is Nadella and team making sure that they're keeping with efficiency and that's the name of the game in Wall Street.' The trimming of the Xbox staff follows Microsoft's years-long expansion of the business surrounding its gaming console, culminating in 2023 with the $75.4-billion acquisition of Activision Blizzard — the California-based maker of hit franchises like Call of Duty and Candy Crush. Before that, in a bid to compete with Sony's PlayStation, it spent $7.5-billion to acquire ZeniMax Media, the parent company of Maryland-based video game publisher Bethesda Softworks. Many of those game studios, which have locations across North America and Europe, were struggling with the layoffs Wednesday, according to social media posts from employees who announced they were looking for new jobs.
CBC
2 hours ago
- CBC
Bay building redevelopment could get $3.4M boost from City of Winnipeg
The redevelopment of the former Hudson's Bay Company building in downtown Winnipeg could get a $3.4-million funding boost from the city. A new report, to be considered by council's executive policy committee next week, calls for funding to make improvements above and below the sidewalks surrounding the building. The Southern Chiefs Organization is in the middle of a $310-million redevelopment of old Hudson's Bay Company building. It's turning the nearly century-old building into a mixed-use development called Wehwehneh Bahgahkinahgohn. The city has already contributed $20.3 million toward the project, including $9.7 million in tax-increment financing and a $10-million grant from the federal housing accelerator fund. Now, city staff recommend giving another $3.4 million in the 2026 budget for streetscaping, including possibly closing a northbound lane of traffic along Memorial Boulevard. Matt Dryburgh, senior manager of economic development and policy, wrote in the report the closure would allow for trees to be planted. "However, further review of the road, land drainage and transit infrastructure considerations are needed to confirm feasibility," Dryburgh wrote. The money would also pay for repairs to areaways — vacant basement spaces that extend out beneath sidewalks. If approved, it would bring the city's total funding to $23.7 million. The funding needs approval from council. The project was originally slated to cost $130 million in 2022, when the Hudson's Bay Company announced the transfer of the six-storey, 655,000-square-foot building at the corner of Portage Avenue and Memorial Boulevard to the SCO, which represents 34 Anishinaabe and Dakota nations in southern Manitoba.
CBC
3 hours ago
- CBC
Automakers push Ottawa to drop EV mandates
Prime Minister Mark Carney met with some of Canada's major automakers on Wednesday to push the government to repeal a mandate requiring all new vehicles to be emissions free by 2035. The meeting happened as Carney tries to land a trade deal with the U.S. by July 21.
