"...simply the best giant energy firm...
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Jul
4
Jonathan Yates
“…simply the best giant energy firm…”
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‘Chevron is simply the best giant energy firm out there,” wrote columnist Kenneth Fisher is a recent Forbes column.  That same appeal of Chevron was the topic of an article on this site back in April, “Soaring for 2013, Analysts project more gains ahead for Chevron.”  As the chart below shows, nothing in the stock price action of Chevron since then has given any doubt as to the accuracy of that article.

Fisher extols the attractiveness of the growth and income aspects of Chevron.  There is certainly much to like about each.  With a 3.36% dividend yield, Chevron offers an income stream well above the 2% average for a stock on the Standard & Poor’s 500 Index.  In addition, as a “Dividend Aristocrat,” Chevron has a history of increasing its dividend each year.  With a dividend payout ratio of just 27%, there is ample cash flow to increase the yield or initiate stock buybacks to reward shareholders.

Chevron is certainly priced well for growth, too.

The price-to-earnings ratio is just 9.  That is pretty much the projected forward price-to-earnings ratio, too.   What will add to its growth is that Chevron has very little debt, too.  The money earned will go to expanding profits, not paying off creditors.

Chevron has a beta of 0.81.  That means it is almost 20% less volatile than the stock market as a whole.  Studies have shown that stocks will low betas have higher returns over the long term.  From that, it turns out that you can be both low risk and high rewards from the same stock.  What helps to keep Chevron’s beta low is the high level of institutional ownership and the high dividend.

With a relative strength index rating of 45, Chevron is not overpriced.  Up 11.86% for the year, Chevron is down for the last month of market action.  Now trading around $119 a share, it is below the mean analyst target price of $132.27 for over the next year of trading.

 



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