Chevron: How Safe Is The Dividend?
Chevron (NYSE:CVX) looks enticing when taking a cursory look at the historical dividend statistics.
The stock currently yields around 4.3% and has provided highly reliable dividend growth over the years.
Chevron’s dividend has increased by 7.8% per year over the last 20 years and by 8.5% annually over the last five years.
The company is also a dividend aristocrat, having raised its dividend for over 28 straight years.
Despite Chevron’s appealing historical dividend growth, income investors have been burned over the past year with a number of high profile dividend cuts in the oil and gas industry.
While Chevron has been a favorite blue-chip dividend stock that has padded dividend investors’ portfolios for years, we think it is prudent to analyze the business to determine if Chevron could be the next one to cut their dividend in this historic oil and gas downturn.
Chevron is a global integrated oil and gas company.
Their upstream operations (~26% of 2015 revenue) consist of exploring for, developing, and producing crude oil and natural gas; processing, liquefaction, transportation and regasification associated with liquefied natural gas; and transporting the crude and natural gas.
The downstream operations (~73% of 2015 revenue) consist of refining crude oil into petroleum products; marketing of crude and refined products; transporting crude oil and refined products by pipeline, marine vessel, and rail car; and manufacturing and marketing of commodity petrochemicals, plastics, fuel additives, and lubricants.
As of the end of 2015, Chevron had significant net proved reserves in their upstream business. These net proved reserves totaled an estimated 6.26 billion barrels of oil and 29.4 billion cubic feet of natural gas.
Their reserves do have some geographic concentrations with 21% of the net proved reserved located in Kazakhstan and 19% located in the United States.
During 2015 Chevron continued to expand production with oil-equivalent production of 2.62 million barrels per day, which was up 2% year-over-year from 2014 levels.