Goldman Sachs Group, Inc. (GS)’s Dividend Picks: Cars, Banks, and Oil

The best big oil dividend

I agree with Goldman Sachs Group, Inc. (NYSE:GS) on its pick of Chevron Corporation (NYSE:CVX), which has a place in The Ultimate Dividend Growth Portfolio. Chevron Corporation (NYSE:CVX) has been a consistent dividend growth stock for a long time, increasing its dividend at an annualized rate of 10.5% over the past decade. Combined with a yield of 3.19% this makes Chevron the best big oil stock out there.

Exxon Mobil Corporation (NYSE:XOM) has grown its dividend at a slightly lower rate over the past decade, 9.3% compared to Chevron’s 10.5%, but its lower yield is what puts Chevron on top. And Chevron Corporation (NYSE:CVX)’s dividend growth doesn’t seem to be slowing. The dividend payment which went ex-div on May 15 was 11% higher than the previous payment, a faster increase than the historical 10-year rate.

Demand for oil will keep rising, and although it’s becoming more difficult to locate new reserves around the world, this demand should drive Chevron’s dividend growth for years to come.

I also have BP plc (ADR) (NYSE:BP) in The Ultimate Dividend Growth Portfolio due to its almost 5% yield. BP plc (ADR) (NYSE:BP) cut its dividend in the wake of the Deepwater Horizon oil spill in 2010, and the company still faces a myriad of lawsuits and possible fines associated with that disaster. BP plc (ADR) (NYSE:BP) is certainly riskier than Chevron for that reason, as a huge fine could put a halt to the dividend growth. But the last increase in 2012 was a solid 12.5%, and with a 5% yield BP seems like it’s worth the risk.

The bottom line

I think that Ford’s dividend growth will be lackluster due to its large debt obligations, and that U.S. Bancorp is not the most attractive bank in terms of the dividend. Chevron, however, is a gem of a dividend stock and should be part of every dividend investor’s portfolio.

The article Goldman’s Dividend Picks: Cars, Banks, and Oil originally appeared on Fool.com and is written by Timothy Green.

Timothy Green has no position in any stocks mentioned. The Motley Fool recommends Chevron and Ford. The Motley Fool owns shares of Ford. Timothy 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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