Chevron (NYSE:CVX) Has Announced That It Will Be Increasing Its Dividend To $1.51

The board of Chevron Corporation (NYSE:CVX) has announced that it will be paying its dividend of $1.51 on the 12th of June, an increased payment from last year's comparable dividend. This takes the annual payment to 3.9% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for Chevron

Chevron's Earnings Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. However, Chevron's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to fall by 22.2%. If the dividend continues along recent trends, we estimate the payout ratio could be 42%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Chevron Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2013, the dividend has gone from $3.60 total annually to $6.04. This implies that the company grew its distributions at a yearly rate of about 5.3% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Chevron has grown earnings per share at 29% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Chevron Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Chevron that investors should take into consideration. Is Chevron not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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