Top Dividend Stock #6: Chevron (CVX)
Dividend Yield: 3.46%
YTD Performance: -7.43%
52-Week Return: -3.38%
Falling one spot from last month’s list of dividend stocks, Chevron (CVX) is one of the largest and most well-known integrated energy companies on the planet. Although the company recently reduced its production volume guidance by about 6% for 2017 — which was due in part to an expected decrease in oil demand, liquefied natural gas prices and asset sales, among other factors — its overall production growth is still better than many of its energy-sector peers.
In fact, CVX was the only company of its kind to forecast growth in 2014. Contributing to the growth will be an 8.6% increase in drilling in the U.S. Permian Basin region (production in the region is expected to double over the course of the decade), as well as higher production from its Texas-New Mexico project.
Even with strong growth prospects, CVX still trades at a discount relative to other energy stocks. With a forward P/E ratio of 9.4 (compared to Exxon‘s (XOM) 12.3), its valuation is very enticing. CVX should continue to outperform the rest of the stocks in the sector as oil prices remain above $100 per barrel for the foreseeable future, and as revenues increase, the company will be able to afford to pay out more to investors.
CVX has a current payout ratio of about 35%, and that is expected to increase to approximately 38% later this year, keeping with the company’s tradition of consecutive dividend increases during the past five years.