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CVX Stock Outlook: The Long-Term Case for Investing in Chevron


  • Chevron (CVX) offers solid financials as well as good value and generous dividends.
  • Furthermore, Chevron is capitalizing on government-permitted offshore drilling opportunities.
  • Investors should strongly consider a long position in CVX stock.
CVX stock - CVX Stock Outlook: The Long-Term Case for Investing in Chevron

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Oil and gas major Chevron (NYSE:CVX) is ambitiously taking advantage of drilling rights provided by the U.S. federal government. Also, CVX stock should reward investors over the long term as Chevron offers an unbeatable value-and-dividends combo in the energy space.

Practically everyone and his uncle knows that Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) CEO Warren Buffett likes to invest in Occidental Petroleum (NYSE:OXY). What you might not know, however, is that Berkshire Hathaway reportedly holds approximately $27 billion worth of Chevron shares.

What do Buffett and Berkshire see in Chevron? With a little bit of digging, we might uncover some data points that make Chevron attractive to sensible long-term investors right now.

CVX Stock Is Ideal for Value and Yield Seekers

Buffett is known for seeking good value, but he also likes businesses that offer dividends and have solid financials. So, let’s see if Chevron checks all of these boxes.

First of all, Chevron’s trailing 12-month price-to-earnings (P/E) ratio of 8.9x looks quite reasonable. Typically, a P/E ratio in the single digits indicates that a company’s shares aren’t too richly valued compared to the company’s earnings.

Next, it’s definitely worth noting that Chevron pays a forward annual dividend yield of 3.53%. One can easily imagine Buffett smiling while he’s collecting those dividend payments every three months.

What about Chevron’s financials, though? From 2018 to 2022, Chevron shrank its total debt from $34.459 billion to $23.339 billion, while also increasing the company’s cash and cash equivalents position from $9.342 billion to $17.678 billion. So, Chevron is in solid financial shape.

Chevron Seizes an Offshore Drilling Opportunity

Chevron’s investor presentation makes it crystal-clear that the company will grow over the coming years though its clean energy initiatives. At the same time, investors can’t deny that Chevron’s bread and butter is the company’s oil-drilling business.

To that end, Chevron took full advantage of a recent federal oil-drilling auction. In this auction, Chevron and other companies bid for “drilling rights in federal waters in the Gulf of Mexico,” according to the Associated Press.

Citing the the Bureau of Ocean Energy Management, Bloomberg reported that Chevron was the highest bidder. Specifically, Chevron will pay $108 million for the “rights to drill 75 tracts.”

Thus, Chevron is demonstrating with actions, not words, that the company is still a power player among oil drillers. Going forward, investors should expect Chevron to continue pursuing green energy initiatives while also aggressively exploring conventional energy exploration and production opportunities.

The Long-Term Case for Investing in CVX Stock Is Undeniable

Chevron has the earmarks of a Buffett favorite: good value, generous dividends and a favorable financial profile. So, it’s easy to see why Buffett would choose to invest in Chevron.

Meanwhile, investors can expect Chevron to continue developing its clean energy and oil drilling operations at the same time. Overall, CVX stock offers excellent value to the shareholders, and investors ought to consider a moderately sized buy-and-hold position.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

Article printed from InvestorPlace Media, https://investorplace.com/2023/04/cvx-stock-outlook-the-long-term-case-for-investing-in-chevron/.

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