Chevron (CVX) Stock Analysis
Current Dividend: $4.32
Dividend Yield: 3.6%
Cash Dividend Payout Ratio: 233%
Market Capitalization: 226 B
Enterprise Value: 265 B
Industry: Oil & Gas Integrated
Chevron is one of the world’s leading integrated energy companies. The company is involved in every facet of the energy industry: exploration, production, and transportation of crude oil and natural gas.
They also refine, market, and distribute transportation fuels and lubricants; manufacture and sell petrochemicals and additives; generate power and produce geothermal energy; as well as develop and deploy technologies that enhance business value.
Source: Chevron Annual Report
Chevrons greatest strength is its size and strong balance sheet. CVX is involved in projects all over the world, offering diversification, and providing protection from any one project going badly and severely hurting the company.
Large investments in the past are just coming online improving cash flow. As projects start generating revenue the company is able to “ride” on its past investments (Permian Basin, Gulf of Mexico, West Africa, Western Australia, and Gulf of Thailand) and invest less in capital improvements while energy prices are depressed.
Low energy prices have disrupted both long and short term plans. Chevron is just finishing a major cycle of investment and have costs that are higher than some competitors. Obviously the revenue from these projects may be much less than was envisioned a couple of years ago.
The oil in industry is extremely capital intensive. It takes a lot of money to find and extract oil from the ground. Chevron must spend billions (avg. 28 billion /year the last 5 years) just to replace the oil being depleted from existing projects.
Low oil prices may shake out many smaller, weaker players in the industry providing bargain investment prices. Chevron is well positioned when and if energy prices rebound. In fact they along with ConocoPhillips, could be two of the biggest winners among the larger companies.
Low oil prices put a strain on the cash flow of even the most financially strong companies. If oil prices stay below $45 for an extended period of time there will have to be major adjustments to capital expenditures, earnings projections, and expected dividends.
Dividend Analyzer Checklist
(updated September 2017)
Dividend Safety Score (17/33 points)
Dividend Per Share (ttm): $4.31
Dividend Payout Ratio (ttm): 139%
Cash Dividend Payout Ratio (ttm): 233%
Cash From Operations (CFO) Per Share (ttm): $9.59
CFO Dividend Coverage (CFO / DPS): 2.2 (2/6 points)
Free Cash Flow (FCF) Per Share (ttm): $1.84
FCF Dividend Coverage (FCF / DPS): 0.4 (0/6 points)
Net Financial Debt: $37996 M
Total Assets: $254599 M
Net Financial Debt / Total Assets: 15% (9/12 points)
Net Financial Debt to EBITDA (ttm): 181%
Total Liabilities to Assets Ratio (Qtr.): 43%
Piotroski Score (1-9) (TTM): (6/9 points)
Profitability & Growth Score (3/33 points)
Revenue (10 Year Growth) *CAGR > 4.14%: -5.9% (0/4 points)
EPS Basic Cont. Operations (10 Year Growth) CAGR > 4.14%: 0.0% (0/4 points)
Cash From Operations (10 Year Growth) CAGR > 4.14%: -6.2% (0/6 points)
Operating Earnings Yield (ttm): 3.4% (0/7 points)
Net Income (ttm): $5830 M
Gross Profit (ttm): $41761 M
Total Assets: $254599
Gross Profitability Ratio = GP / Total Assets: 16% (3/12 points)
Cash Return On Invested Capital (CROIC)(tttm): 2%
Return on Invested Capital (ROIC): 3%
Return on Invested Capital (ROIC) (5 Year Median): 10%
Return on Invested Capital (ROIC) (10 Year Median): 16%
Valuation Score (14/34 points)
Free Cash Flow Yield (ttm): 1.7% (2/9 points)
EV to EBIT (ttm): 35.1 (0/9 points)
EV to EBITDA (ttm): 9.8 (6/9 points)
PE10: 12.8 (6/7 points)
Price to Sales Ratio (ttm): 1.6
Price to Book Value (ttm): 1.4
Price to Earnings Ratio (P/E) (ttm): 35.3
TOTAL POINTS – (34/100) (50 is an average score)
*Compound Annual Growth Rate (CAGR)
**A Compound Annual Growth Rate of 4.14% = a 50% gain over 10 years.
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(updated September 2017)
Chevron (CVX) is ranked #277 (out of 342) overall and #16 (out of 24) in the Energy Sector by the Dividend Analyzer.
Chevron is one of only two energy companies that qualify as a Dividend Aristocrat (ExxonMobil (XOM) is the other); although these companies carry much more risk than they have in the past.
Low oil prices and greater debt should be a concern. On the other hand, if you believe energy prices are only temporarily depressed, these could be above average investments. You can collect the high dividend yield while you wait for more favorable prices.
Type of Investor / Recommendation
Large Diversified Dividend Portfolios / Below Average Option
Looking For Exposure to Energy Sector / Can Be Considered
Deep Value Investors / Watchlist
Portfolio Position Disclosures:
DVB Foundation Portfolio: None
DVB Dividend Growth: None
DVB High Income: None
Arbor Asset Allocation Model Portfolio (AAAMP): None
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