We recently compiled a list of the 10 Best Dividend Aristocrat Stocks To Buy Right Now. In this article, we are going to take a look at where Chevron Corporation (NYSE:CVX) stands against the other dividend aristocrat stocks.

Investors usually buy stocks with the expectation that their value will increase as the company grows more profitable. However, stocks can offer additional advantages. As businesses succeed and mature, they often choose to distribute a portion of their profits to shareholders as cash dividends. Even more appealing are companies that not only pay dividends but consistently increase them year after year. These stocks have delivered impressive performance over time compared to other asset classes.

According to a report by Thornburg Investment Management, from 1990 to 2023, bond yields, represented by the Bloomberg U.S. Aggregate Bond Index, fell significantly from nearly 9% to 3.41%. Similarly, equity yields, reflected by the dividend payouts on the Dividend Aristocrats Index, declined from just over 3% to 2.42% during the same period. The Dividend Aristocrats Index tracks large-cap, blue-chip US companies within the broader market that have consistently increased their dividends for at least 25 consecutive years. The report further mentioned that dividend-paying stocks can not only offer a source of current income with the potential for growth over time but also help investors bring greater stability to their portfolios in the long run. The report cited Bloomberg’s data and highlighted that dividend aristocrats delivered an 11.63% return to shareholders between 1990 to 2023, compared with a 10.2% return for the broader market.

Excluding the aristocrat factor from dividend stocks highlights their significance in overall market returns. A report by S&P Dow Jones Indices reveals that since 1926, dividends have accounted for roughly 32% of the broader market’s total returns, with the remaining 68% coming from capital appreciation. This demonstrates that both steady dividend income and the potential for capital growth play crucial roles in shaping total return expectations. The report also highlighted the significant impact of compounding when it comes to dividends. Without dividends, the market’s return from January 1, 1930, to the end of July 2023 would have grown to 214%. However, if dividends had been reinvested during the same period, the return would have reached an impressive 7,219%.

Also read: 8 Magnificent Dividend Growth Stocks to Buy Now

The dividend aristocrat index has delivered a 12.5% return since the start of 2024, underperforming the broader market that has returned nearly 27%. Although dividend stocks have lagged in performance this year, companies continue to increase their payouts, reflecting investor preferences steadily. According to a recent report from S&P Dow Jones Indices, 480 dividend increases were recorded in Q3 2024, compared to 448 in Q3 2023, representing a 7.1% year-over-year growth. The total value of these increases for the quarter reached $14.1 billion. Over the past 12 months, dividend increases amounted to $74.7 billion, up from $63.9 billion in the previous year.

Our Methodology:

For this article, we first listed down all dividend aristocrat stocks — the companies with 25+ years of consecutive dividend increases. From that list, we picked 10 stocks with the highest number of hedge fund investors and ranked them in ascending order of hedge funds’ sentiment towards them, as per Insider Monkey’s Q3 2024 database.

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).

Chevron Corporation (NYSE:CVX)

Number of Hedge Fund Holders: 63

Chevron Corporation (NYSE:CVX) is an American multinational energy company that mainly specializes in oil and gas. Over the years, the company has become one of the largest energy businesses globally. It invests billions annually in expanding its operations, both through organic growth and acquisitions. These efforts not only drive business growth but also enhance its profitability and cash flow. Since the start of 2024, the stock has surged by nearly 8% and its 12-month return came in at roughly 12%.

In the third quarter of 2024, Chevron Corporation (NYSE:CVX) reported revenue of $50.67 billion, which, though, fell by over 6% from the same period last year, beat analysts’ estimates by $1.63 billion. The company increased its global production by 7% compared to the previous year, reaching nearly 3.4 million barrels of oil equivalent per day (BOE/d). This growth was driven by record production levels in the Permian Basin and the acquisition of PDC Energy.

As highlighted earlier, Chevron Corporation (NYSE:CVX) has steadily increased its cash flow over the years, which is encouraging news for income-focused investors. In the most recent quarter, the oil giant generated approximately $9.7 billion in operating cash flow, up from $6.3 billion in the previous quarter. This cash flow was enough to pay $7.7 billion to shareholders through dividends and share repurchases.

On November 1, Chevron Corporation (NYSE:CVX) declared a quarterly dividend of $1.63 per share, which was in line with its previous dividend. Overall, the company has raised its payouts for 37 consecutive years, which makes CVX one of the best dividend aristocrat stocks. The stock has a dividend yield of 4.04%, as of November 25.

At the end of Q3 2024, 63 hedge funds tracked by Insider Monkey held stakes in Chevron Corporation (NYSE:CVX), compared with 64 in the previous quarter. These stakes have a total value of over $21 billion. With nearly 119 million shares, Warren Buffett’s Berkshire Hathaway owned the largest stake in the company.

Overall CVX ranks 10th on our list of the best dividend aristocrat stocks to buy. 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 timeframe. 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. 

READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.

Disclosure: None. This article is originally published at Insider Monkey.