Chevron Corporation (CVX): Delivering Dividends, Attractive Entry Point For The Patient Investor

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The stock of Chevron Corporation (NYSE:CVX) – the 2nd largest United States oil company is still attractive despite reporting a significant loss in its most recent quarter.

Chevron is one of only 2 oil and gas Dividend Aristocrats, and is one of the 6 oil and gas super majors. Chevron stock is currently offering investors a high dividend yield.

Among the smart money investors tracked by Insider Monkey, billionaire Ken Fisher’s Fisher Asset Management owns 3.64 million shares of Chevron Corporation as of the end of March; the investor boosted its stake by 31% on the quarter.

While waiting for a significant recovery in the price of oil, investors can enjoy the generous dividend currently yielding 4.2% a year.

On April 29, Chevron reported its first-quarter 2016 financial results.

CVX Financial Highlights

Source: 2016 1Q Earnings Conference Call Presentation

Although the company posted a significant loss in the quarter, it beat the adjusted earnings-per-share expectations by $0.09 (45%). Quarterly revenue fell 28% year over year to $23,553 million but was slightly higher than Street forecasts of $23,547 million. Chevron beat adjusted earnings-per-share estimates in six of its last nine quarters, as shown in the table below.

CVX Earnings Surprise

Data: Yahoo Finance

In the report, Chairman and CEO John Watson, said:

“First quarter results declined from a year ago. Our Upstream business was impacted by a more than 35 percent decline in crude oil prices. Our Downstream operations continued to perform well, although overall industry conditions and margins this quarter were weaker than a year ago.”

To emphasize the dramatic change in Chevron’s earnings due to the crash in oil prices, I put together, in the charts below, the upstream and the downstream earnings in the U.S. and international in the last five quarters.

Total upstream earnings in the first quarter of 2016 were negative at -$850 million in the U.S. and -$609 million international. In contrast to upstream operations profitability that is directly correlated to oil prices, downstream operations are benefiting from the high refining margins, even though lower in the last quarter and strong demand for refined products. Total downstream earnings in the first quarter of 2016 were at $247 million in the U.S. and $488 million international.

 Chevron Earnings

Source: Company’s reports

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