We recently compiled a list of the 7 Cheap Quarterly Dividend Stocks to Invest in. In this article, we are going to take a look at where Chevron Corporation (NYSE:CVX) stands against the other cheap quarterly dividend stocks.
Growth stocks are typically seen as companies with the potential to outperform the market in the future, even if they are currently unprofitable or trading at high valuations. While they offer the possibility of substantial returns, they also come with significant risks. In contrast, value stocks tend to perform well when the broader economy is expanding. These are well-established companies with consistent profits, many of which pay dividends. Investors are drawn to them because they are often perceived as undervalued relative to their true worth. Sectors like banking, utilities, and healthcare fall into this category. Historically, value stocks have outpaced growth stocks for much of the market’s history, but that trend has reversed over the past decade.
Over the past five years, the growth stocks in the Vanguard Fund have surged approximately 111%, with much of the increase occurring after the fourth quarter of 2022. This momentum was largely driven by major tech firms introducing artificial intelligence products and services, which accelerated earnings growth and lifted valuations. Meanwhile, value stocks have struggled to keep pace. Since late 2022, the value stocks in the Vanguard Fund have lagged behind its growth-focused counterpart and have gained only 48% over the past five years. In theory, this gap suggests value stocks could eventually rebound. Many of these companies continue to generate profits and return a portion to shareholders, so at some point, buyers may step in, pushing their performance closer to historical norms.
By the end of 2024, the value fund was trading at around 16 times its projected earnings for the year, significantly lower than the growth fund, which was valued at approximately 27 times earnings. This represents a roughly 40% discount, compared to the average 30% gap over the past decade, according to Barron’s analysis of FactSet data. This valuation gap makes value stocks look more appealing. If these companies deliver earnings in line with or above analysts’ expectations, they could demonstrate to the market that they are worth more than their current prices suggest, potentially leading to strong stock performance.
Also read: 15 Best Monthly Dividend Stocks To Buy Right Now
As noted earlier, value stocks are often associated with dividend payments. These stocks typically offer higher dividend yields and stronger fundamental ratios compared to growth stocks. When it comes to dividend investing, dividend growth plays a crucial role. The Dividend Aristocrats Index serves as a key benchmark for dividend-focused strategies, tracking companies that have increased their payouts for at least 25 consecutive years.
A report by S&P Dow Jones Indices highlighted that investment strategies focused on income generation tend to display value-oriented characteristics. Stocks with high dividend yields and lower valuations frequently attract investor interest. However, the report also pointed out that the Dividend Aristocrats Index blends both growth and value traits rather than leaning heavily toward one style. A comprehensive analysis of the index from 1999 to 2022 revealed that, on average, 59.04% of its holdings were value stocks, while 40.94% were classified as growth stocks. Given this, we will take a look at some of the best cheap quarterly dividend stocks to invest in.
Our Methodology:
For this list, we scanned through Insider Monkey’s database of 900 hedge funds as of Q3 2024 and selected dividend companies with strong dividend histories and yields of at least 1%, as of January 30. From that list, we picked dividend stocks with forward P/E ratios below 16, as of January 30. The low price-to-earnings ratio shows that they are traded below their intrinsic value. The stocks are ranked in descending order of their P/E multiples. We also considered hedge fund sentiment around each stock using Insider Monkey’s data for Q3 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
An aerial view of an oil rig at sea, the sun glinting off its structure.
Chevron Corporation (NYSE:CVX)
Forward P/E Ratio: 12.59
Chevron Corporation (NYSE:CVX) is an American multinational energy company that manufactures and sells a range of high-quality refined products. The company aims to remain profitable even if oil prices moderate, ensuring it can support capital projects and increase dividend payouts. To accomplish this, the company is targeting an additional $2 billion to $3 billion in structural cost reductions by 2026 while prioritizing a low-cost, high-margin production strategy. In the past 12 months, the stock has surged by nearly 5%.
Chevron Corporation (NYSE:CVX) has drawn investor interest with its strong cash position. The company’s CEO recently detailed plans to increase free cash flow by $6 billion to $8 billion next year, alongside significant cost reductions. These gains are expected to come from expanded oil production efforts in Kazakhstan, US shale regions, and the offshore Gulf of Mexico. In the latest quarter, the company reported an operating cash flow of $9.7 billion, up from $6.3 billion in the same period last year. In addition, it returned $7.7 billion to shareholders through dividends and share repurchases.
Chevron Corporation (NYSE:CVX) remains a preferred pick for income-focused investors, having increased its dividend payouts for 37 consecutive years, even through industry downturns. This track record makes it a dependable choice for those new to the sector and looking for stable investments. Unlike many exploration and production (E&P) firms, which tend to carry greater risk, Chevron provides a more reliable option with consistent returns. It currently offers a per-share dividend of $1.63 every quarter and has a dividend yield of 4.16%, as of January 30.
At the end of Q3 2023, 63 hedge funds tracked by Insider Monkey owned stakes in Chevron Corporation (NYSE:CVX), compared with 64 in the previous quarter. These stakes have a consolidated value of over $21 billion.
Overall CVX ranks 1st on our list of the cheap quarterly dividend stocks to invest in. While we acknowledge the potential for CVX as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CVX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.