With those factors in mind, let’s take a closer look at Chevron.
| Factor | What We Want to See | Actual | Pass or Fail? |
|---|---|---|---|
| Size | Market cap > $10 billion | $227 billion | Pass |
| Consistency | Revenue growth > 0% in at least four of five past years | 3 years | Fail |
| Free cash flow growth > 0% in at least four of past five years | 3 years | Fail | |
| Stock stability | Beta < 0.9 | 0.78 | Pass |
| Worst loss in past five years no greater than 20% | (18.3%) | Pass | |
| Valuation | Normalized P/E < 18 | 7.91 | Pass |
| Dividends | Current yield > 2% | 3.1% | Pass |
| Five-year dividend growth > 10% | 9.2% | Fail | |
| Streak of dividend increases >= 10 years | 25 years | Pass | |
| Payout ratio < 75% | 27% | Pass | |
| Total score | 7 out of 10 |
Source: S&P Capital IQ. Total score = number of passes.
Since we looked at Chevron last year, the company has dropped a point for the second year in a row, with falling revenue leading to the decline. The stock has managed to do a little better, picking up about 5% over the past year.
Chevron has had a rough year, facing the twin headwinds of challenges in maintaining production levels and lower prices for both oil and natural gas. Moreover, with legal issues in Brazil and Ecuador resulting from environmental damage, Chevron has found itself on the defensive in its international operations.
But Chevron is doing its best to grow. It took advantage of Chesapeake Energy Corporation (NYSE:CHK)‘s need to raise cash by spending $3.3 billion to buy nearly all of Chesapeake’s assets in the Permian Basin. It’s even working closely with ExxonMobil to develop an Australian liquefied-natural-gas project that could supply China and the rest of Asia with gas later this decade.
More recently, Chevron’s growth attempts have begun to pay off. In its most recent quarter, the company reported rising production levels both in the U.S. and abroad in net oil-equivalent terms, with international nat-gas production and domestic liquids production leading the way.
For retirees and other conservative investors, it’s hard to argue with the rock-bottom valuation that Chevron sports right now. With the company having recently reached the 25-year dividend increase milestone to become a Dividend Aristocrat, Chevron looks more attractive than ever as a core energy stock for retirement portfolios.
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The article Will Chevron Help You Retire Rich? originally appeared on Fool.com and is written by Dan Caplinger.
Fool contributor Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Chevron. The Motley Fool has options positions on Chesapeake Energy.
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