Chevron(NYSE: CVX) is one of the most popular oil stocks. Here's a quick look at how much you'd have today if you invested $1,000 into its stock five years ago.
Chevron's dividend helps fuel its returns
If you bought $1,000 of Chevron stock five years ago, it would be worth around $1,350 today (about a 35% gain, or 6.1% annualized). That's significantly less than you'd have if you invested the same amount in an S&P 500 index fund. That broader market index is up more than 70% over the last five years (11.4% annualized), growing a $1,000 investment into about $1,720.
However, Chevron's total return is a lot higher when adding in the oil giant's lucrative and steadily rising dividend:
That's not too bad, considering how volatile oil prices have been in the period.
Chevron expects to have the fuel to continue growing its dividend in the future. Its current high-return investment strategy would produce enough cash at a modest oil price to grow its free cash flow by 10% annually through 2027.
Meanwhile, there's ample upside to that plan if Chevron can close its roughly $60 billion acquisition of Hess(NYSE: HES). There's a lot of uncertainty about whether that needle-moving deal will close. However, buying Hess would enhance and extend Chevron's growth outlook into the 2030s. Further, it would position the oil company to more than double its free cash flow by 2027, assuming crude oil averages $70 a barrel.
Chevron's dividend is a big part of its return
Chevron's top financial priority is to grow its dividend. Because of that, it's important to keep the dividend in mind when investing in its stock.
If you're seeking a stock with high price appreciation potential, you might want to look elsewhere. However, if you're seeking a company that can pay an attractive and growing dividend, Chevron is a solid bet. The oil company currently yields 4% and should have plenty of fuel to continue growing that payout in the future.
Should you invest $1,000 in Chevron right now?
Before you buy stock in Chevron, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Chevron wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
*Stock Advisor returns as of April 22, 2024
Matt DiLallo has positions in Chevron. The Motley Fool has positions in and recommends Chevron. The Motley Fool has a disclosure policy.
