9 Best Dow Stocks to Buy According to Analysts

6. Chevron Corporation (NYSE:CVX)

Average Upside Potential as of October 23: 13.64%

Number of Hedge Fund Holders: 64

Chevron Corporation (NYSE:CVX) is one of the energy stocks that have come down tumbling in the aftermath of oil prices plunging from above $80 a barrel to lows of $70 a barrel. While the stock is flat for the year compared to a 13% gain for the Dow Jones index, it is one of the best Dow stocks to buy, according to analysts.

The fact that the company boasts of one of the lowest debt-to-equity ratios of 0.15 underlines its ability to generate significant cash flows, consequently maintaining low debt levels. Additionally, Chevron Corporation (NYSE:CVX) is one of the largest and most diversified energy companies that should continue to generate long-term value with oil prices above $40 a barrel.

Chevron boasts of an impressive track record of dividend growth supported by a strong balance sheet. It boasts an above-industry average yield of 4.4%, making it a solid investment play for passive income.  The company has increased its dividend payment for 37 consecutive years, which is an incredible feat given the challenges in the energy sector.

While falling oil prices will affect Chevron Corporation (NYSE:CVX), it is well-equipped to handle lower prices. The company is well positioned to generate enough cash flow for operations to cover its dividend, even with oil prices dropping to the $50 barrel level. Likewise, it can use its cash-rich solid balance to repurchase shares, bolstering its earnings per share.

By purchasing Hess, Chevron Corporation (NYSE:CVX) hopes to improve its capacity to prosper at lower oil prices further. That deal would greatly strengthen and extend Chevron’s production and free cash flow growth profile. On the other hand, analysts on Wall Street maintain a buy rating on Chevron with an average price argot of $171.50, implying a 13.64% upside potential.

According to Insider Monkey’s database for Q2 2024, 64 hedge funds had investments in Chevron, up from 62 in the first quarter.

In its Q4 2023 investor letter, Diamond Hill Capital’sDiamond Hill Large Cap Strategy shared insights on Chevron Corporation (NYSE:CVX):

“Other bottom contributors included Chevron Corporation (NYSE:CVX), Carrier Global and Becton, Dickinson. Shares of integrated oil and gas company Chevron were pressured as global oil production is growing — particularly in the US, which has now surpassed its past production levels — in turn pressuring oil prices and company profit margins.”