Chevron Corporation (CVX), Valero Energy Corporation (VLO): The Bluest of the Blue Chips

Chevron is currently trading near its all time high, but its price to earnings ratio, or P/E, is only 9.3. Exxon Mobil Corporation (NYSE:XOM), in comparison, has a slightly higher P/E of 9.5 and a dividend yield of 2.7%.

Exxon Mobil Corporation (NYSE:XOM), also a well respected blue chip, is one of the largest companies in the world with a market cap of $415 billion. Exxon Mobil Corporation (NYSE:XOM) is the world’s largest refiner and marketer of petroleum products and its global businesses include one of the world’s largest petrochemical operations.

Both Chevron and Exxon Mobil Corporation (NYSE:XOM) are good investment choices, but my personal preference is Chevron, due to its higher dividend yield. Also, Chevron is about half of the size of Exxon Mobil Corporation (NYSE:XOM) and has more room for growth.

Another competitor is Valero Energy Corporation (NYSE:VLO) . Valero owns and operates 16 petroleum refineries, 10 ethanol plants, and a 50-megawatt wind farm. Its products are marketed in 7300 retail centers in the U.S., Canada, the Caribbean, the United Kingdom, and Ireland. Valero Energy Corporation (NYSE:VLO)’s products include gasoline, lubricants, petrochemicals, and asphalt.

Valero Energy Corporation (NYSE:VLO) only operates in the downstream energy marketplace and must purchase oil for its refineries. Diversified companies such as Chevron have an advantage over Valero Energy Corporation (NYSE:VLO), since they produce their own oil, resulting in a lower operating cost in the refining process.

During a booming economy, Valero Energy Corporation (NYSE:VLO) typically performs well. However, it lacks Chevron’s diversity, which was evident during Valero Energy Corporation (NYSE:VLO)’s significant losses during the great recession.

The Foolish bottom line

Energy is required in almost every aspect of our lives. As the economy improves and the global population continues to increase, the demand for energy should rise significantly. As a result, I believe that energy is a great sector to invest in and that every investor should have exposure to it. Due to its diverse operations, attractive dividend, and impressive long term growth, I am establishing Chevron Corporation (NYSE:CVX) as my first “Bluest of the Blue” recommendation!

The article The Bluest of the Blue Chips originally appeared on Fool.com and is written by Greg Williamson.

Greg Williamson owns shares of Chevron. The Motley Fool recommends Chevron. Greg is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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