We recently compiled a list of the Dividend Aristocrats: Top 7 Companies by Yield for November 2024. In this article, we are going to take a look at where Chevron Corporation (NYSE:CVX) stands against the other dividend aristocrats.
When it comes to investing in stocks, investors are always on the lookout for companies that can deliver steady income. That’s why dividend stocks have always been a favorite. Among these, companies with the ability to grow their dividends consistently tend to be the ones that come out on top. Dividend aristocrats are companies that have consistently increased their dividends for 25 years or more. Achieving this is no small accomplishment. Paying regular dividends can be challenging for many companies, let alone raising them for over two decades.
Dividend aristocrats have delivered strong returns, outperforming other asset classes. According to a report by S&P Dow Jones Indices, from the index’s launch in 2005 through September 2023, the dividend aristocrats index achieved a total return of 10.35%, surpassing the broader market’s 9.54% return over the same period. These stocks are praised for not only their consistent dividend growth and steady equity gains but also their lower volatility. Over this time, dividend aristocrats experienced a volatility rate of 15.35%, compared to the market’s slightly higher 16.31%. This suggests that dividend aristocrats generally exhibit more stable price movements. Their long history of increasing dividends for 25 years or more shows their ability to reward shareholders even during challenging times, such as the 2007 financial crisis and the 2020 pandemic.
A report from Thornburg Investment Management compares the income generated from a hypothetical $1 million investment in the Bloomberg US Aggregate Bond Index versus the Dividend Aristocrats Index from 1990 to 2023. The findings showed that the income from the $1 million investment in the Bloomberg US Aggregate Bond Index decreased from around $90,000 annually in 1990 to just under $37,000 in 2023. In contrast, the income from the Dividend Aristocrats Index grew significantly, rising from about $30,000 in 1990 to more than $400,000 in 2023. The report also highlighted that dividend aristocrats outperformed the market in four of the six five-year periods between 1990 and 2023. This consistent outperformance, coupled with more stable returns, demonstrates the index’s ability to deliver strong results over time.
Also read: 10 Best Dividend Aristocrat Stocks To Buy Right Now
The debate between high yields and dividend growth remains ongoing. Many investors believe that high yields are not necessarily risky. Achieving 25 consecutive years of dividend growth doesn’t require sacrificing yield. According to a report by S&P Dow Jones Indices, Dividend Aristocrats have consistently provided higher yields than the broader market, typically ranging from 2.0% to 2.9% over the 26-year period from 1998 to 2022.
Some studies have emphasized the long-term advantages of high-yield stocks, noting that as dividend yields rise, both returns tend to improve and risk decreases. Hartford Funds recently conducted an in-depth analysis of this, considering annualized standard deviation, which measures the volatility of a portfolio’s returns. A higher standard deviation indicates greater historical volatility. According to the findings, from December 1969 to March 2024, high-dividend portfolios produced an annualized return of 12.3%, mid-dividend portfolios returned 10.5%, and low-dividend portfolios earned 9.7%. The annualized standard deviations for these portfolios were 14.1%, 16%, and 20.8%, respectively.
Our Methodology:
For this list, we looked at a group of 67 dividend aristocrat companies, which are known for raising dividends for 25 years or more. From this list, we chose 7 stocks with the highest dividend yields as of November 26 and arranged them in order from lowest to highest yield. We also measured hedge fund sentiment around each stock according to Insider Monkey’s database of 900 as of Q3 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
An aerial view of an oil rig at sea, the sun glinting off its structure.
Chevron Corporation (NYSE:CVX)
Dividend Yield as of November 26: 4.07%
Chevron Corporation (NYSE:CVX) is a California-based energy company that specializes in oil and gas. It is one of the best dividend aristocrat stocks with a 37-year streak of consistent dividend growth. Currently, the company offers a quarterly dividend of $1.63 per share and has a dividend yield of 4.07%, as of November 26.
Chevron Corporation (NYSE:CVX) has grown into one of the world’s leading energy enterprises over time. It commits billions each year to expand its operations, leveraging both organic growth and acquisitions. These investments fuel business expansion while boosting profitability and cash flow. In the third quarter of 2024, the company generated $9.7 billion in operating cash flow, which grew from $6.3 billion in the previous quarter. It returned $7.7 billion to shareholders through dividends and share repurchases during the quarter.
Chevron Corporation (NYSE:CVX) reported strong earnings in the third quarter of 2024, with revenues amounting to $50.67 billion. The revenue surpassed analysts’ estimates by $1.63 billion. The company also achieved a 7% increase in global production from the previous year, bringing output to nearly 3.4 million barrels of oil equivalent per day (BOE/d). This growth was fueled by record production in the Permian Basin and the acquisition of PDC Energy.
Chevron Corporation (NYSE:CVX) was a part of 63 hedge fund portfolios at the end of Q3 2024, compared with 64 in the previous quarter, as per Insider Monkey’s database. The stakes held by these hedge funds have a consolidated value of over $21 billion. With nearly 119 million shares, Warren Buffett’s Berkshire Hathaway owned the largest stake in the company.
Overall CVX ranks 4th on our list of the best dividend aristocrat stocks to buy. While we acknowledge the potential for CVX as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CVX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
