Income investors are on the hunt for stocks that provide current dividend yields that surpass the yield on the S&P 500 Index, which currently stands around 2%. Dividend growth investors look for stocks that raise their payouts on a regular basis, at growth rates that will allow them to maintain purchasing power over time. Growth investors, on the other hand, look for companies that grow sales and profits at high rates and reward their investors with big capital gains.
A great business with great performance
Chevron Corporation (NYSE:CVX) is a juggernaut in the integrated energy space. The company is one of the world’s largest publicly traded stocks, with a market value in excess of $240 billion. Chevron Corporation (NYSE:CVX) generated more than $26 billion in profits in fiscal 2012.
Chevron Corporation (NYSE:CVX)’s immense proven reserves place the company in a great position going forward. Chevron Corporation (NYSE:CVX) added approximately 1.07 billion barrels of net oil-equivalent proved reserves in 2012, which equate to 112% of net oil-equivalent production for the year.
Not the only industry giant
It goes without saying that oil is big business. Not surprisingly, there are many highly profitable energy stocks for investors to choose from, aside from Chevron. One such stock is Marathon Oil Corporation (NYSE:MRO), a $25 billion global energy company.
Marathon Oil Corporation (NYSE:MRO) is highly profitable, evidenced by the company reporting 20% growth in diluted net income per share in the first quarter of 2013 as compared to the fourth quarter of 2012.
Like Chevron, Marathon Oil pays a dividend. However, its dividend stands at a paltry 1.9%, less than both Chevron’s payout and the dividend yield on the broader market. In addition, Marathon Oil hasn’t provided its investors with a dividend increase since early 2012, whereas Chevron has increased its dividend for 26 years in a row.
For investors interested in broadening their geographical horizons, French oil major Total SA (ADR) (NYSE:TOT) is a great international candidate to consider. Total SA (ADR) (NYSE:TOT) carries a $115 billion market capitalization. Total offers a rock-solid 5% dividend yield, and trades at a trailing price-to-earnings ratio of only 10, according to Yahoo Finance.
Like its peers, Total is solidly profitable. The company reported an 8% increase in both sales and full-year adjusted net income per share (in euros). The company is a great cash generator, reporting a 15% year over year increase in cash from operations during 2012. In addition, the company is conservatively capitalized, carrying a net-debt-to-equity ratio of only 21.4%.
The Foolish takeaway
Finding successful companies with high dividend yields in today’s market is a tough job. With interest rates at historic lows and the stock market breaching uncharted territory, it’s getting harder and harder to find modestly valued dividend stocks that still have compelling yields.
Chevron has certainly rallied strongly alongside the broader market. However, unlike less successful companies, Chevron’s strong price performance is well-justified. And fortunately for investors who missed the company’s rally, the company still holds a reasonable valuation and provides a 3% dividend yield.
Moreover, the shareholder rewards are likely to continue for many years to come. Chevron operates in an industry that is essential to our society, and has a demonstrated track record of providing strong profit growth and dividend increases. While new investors are not getting Chevron at the bargain price they could have a few years ago, they’ll still get a massively profitable business and should do well for the foreseeable future.
The article Is Chevron a Good Stock to Buy? originally appeared on Fool.com.
Robert Ciura has no position in any stocks mentioned. The Motley Fool recommends Chevron and Total SA. (ADR). Robert 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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