Chevron Corporation (CVX), through its subsidiaries, is engaged in petroleum, chemicals, mining, power generation, and energy operations worldwide. The company operates in two segments, Upstream and Downstream. This dividend champion has paid a dividend since 1912 and increased it for 27 years in a row.
In April 2014, the Board of Directors approved a 7% increase in the quarterly dividend to $1.07/share. Chevron’s peers include Exxon Mobil (XOM), ConocoPhillips (COP) and British Petroleum (BP).
The company has managed to deliver a 12% average increase in annual EPS over the past decade. Chevron is expected to earn $10.81 per share in 2014 and $11.37 per share in 2015. In comparison, the company earned $11.09/share in 2013.
The annual dividend payment has increased by 10.50% per year over the past decade, which is lower than the growth in EPS. Future growth in dividends will likely match rate of increase in earnings per share.
Currently, Chevron is attractively valued at 11.80 times forward earnings, and has a dividend yield of 3.30%. Overall, I believe that oil companies like Chevron have the quality of assets that generate strong cash flows, and quality of a management team, coupled with a dedication to sharing the wealth with shareholders through a commitment to dividend growth and share buybacks. While dividend growth rates might fluctuate from year to year, I am firmly believing that the investor with a 20 year horizon, who patiently accumulates and reinvests dividends, will reap the rewards in the future.
Full Disclosure: Long CVX, XOM and BP
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