Chevron Corporation (CVX). Below are some highlights from the above linked analysis:
Company Description: Chevron Corporation is a global integrated oil company (formerly ChevronTexaco) has interests in exploration, production, refining and marketing, and petrochemicals
Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these four calculations of fair value, see page 2 of the linked PDF for a detailed description:
1. Avg. High Yield Price
2. 20-Year DCF Price
3. Avg. P/E Price
4. Graham Number
CVX is trading at a premium to all four valuations above. When also considering the NPV MMA Differential, the stock is trading at a 63.2% premium to its calculated fair value of $71.58. CVX did not earn any Stars in this section.
Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:
1. Free Cash Flow Payout
2. Debt To Total Capital
3. Key Metrics
4. Dividend Growth Rate
5. Years of Div. Growth
6. Rolling 4-yr Div. > 15%
CVX earned two Stars in this section for 2.) and 3.) above. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45%. CVX earned a Star for having an acceptable score in at least two of the four Key Metrics measured. The company has paid a cash dividend to shareholders every year since 1912 and has increased its dividend payments for 29 consecutive years.
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA) or Treasury bond? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:
1. NPV MMA Diff.
2. Years to > MMA
The NPV MMA Diff. of the $255 is below the $600 target I look for in a stock that has increased dividends as long as CVX has. The stock's current yield of 3.67% exceeds the 2.79% estimated 20-year average MMA rate.
Peers: The company's peer group includes: BP plc (BP) with a 6.3% yield, Exxon Mobil Corporation (XOM) with a 3.4% yield and ConocoPhillips (COP) with a 2.0% yield.
Conclusion: CVX did not earn any Stars in the Fair Value section, earned two Stars in the Dividend Analytical Data section and did not earn any Stars in the Dividend Income vs. MMA section for a total of two Stars. This quantitatively ranks CVX as a 2-Star Weak stock.
Using my D4L-PreScreen.xls model, I determined the share price would need to decrease to $90.53 before CVX's NPV MMA Differential increased to the $600 minimum that I look for in a stock with 29 years of consecutive dividend increases. At that price the stock would yield 4.7%.
Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $600 NPV MMA Differential, the calculated rate is 3.0%. This dividend growth rate is higher than the 0.2% used in this analysis, thus providing no margin of safety. CVX has a risk rating of 1.50 which classifies it as a Low risk stock.
The company's free cash flow payout at -100% (down from -80%) continues to be unfavorable. The stock is trading at a premium to my $71.58 calculated fair value. In fourth quarter of 2016 the company increased its dividend to $1.08 per share, otherwise it would have been flat year-over-year leading to a sell in my portfolio. Until I see improvement in the free cash flow payout, I will not add to my position.
Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.
Full Disclosure: At the time of this writing, I was long in CVX (0.5% of my Dividend Growth Portfolio) and was also long XOM. See a list of all my dividend growth holdings here.
- Kimberly-Clark Co. (KMB) Dividend Stock Analysis
- Illinois Tool Works Inc. (ITW) Dividend Stock Analysis
- Pepsico, Inc. (PEP) Dividend Stock Analysis
- Phillips 66 (PSX) Dividend Stock Analysis
- Wells Fargo & Company (WFC) Dividend Stock Analysis
- More Stock Analysis
Tags: CVX, BP, XOM, COP,
Popular Posts - Last 7 days
Over the last 12-18 months, there have been several prognosticators saying dividend stocks are extremely over valued. In many cases, I woul...
It is a well-documented fact that a significant portion of the historical equity returns are a result of reinvested dividends. In Triumph of...
Linked here is a detailed quantitative analysis of International Business Machines Corp. (IBM). Below are some highlights from the above li...
Each weekend I highlight any notable articles that I came across over the past week. Though I may not always agree with each of the articles...
Linked here is a detailed quantitative analysis of Duke Energy (DUK). Below are some highlights from the above linked analysis: Company D...
As mentioned in previous articles, I love inspirational (and other) quotes . I see quotes as a portal to someone’s inner self. They reveal m...
In an utopian world, the perfect dividend stock would be one that is both high-yield and provide a high dividend growth rate. Its share pri...
There are only few things in life that I consider myself an expert in , but when it comes to making investing mistakes I have earned several...
Linked here is a detailed quantitative analysis of The Clorox Company (CLX). Below are some highlights from the above linked analysis: Co...
Presented below are are my Dividend Growth Stocks portfolio holdings. This is not a recommendation to buy these securities. I have classifi...