Why Chevron Is an Attractive Addition to the Portfolio

Chevron (CVX) is one of the world’s leading integrated energy companies with subsidiaries that conduct business worldwide.  They are involved in virtually every facet of the energy industry. CVX explore for, produce and transport crude oil and natural gas; refine, market and distribute transportation fuels and lubricants; manufacture and sell petrochemical products; generate power and produce geothermal energy; provide energy efficiency solutions; and develop the energy resources of the future, including biofuels.

Market turmoil is creating opportunities such as CVX. The valuation outlined in this article makes CVX a compelling addition to the portfolio. The dividend yield is in excess of 3% and the stock trades at a substantial discount to fair value. The company has a history of increasing the dividend and we expect this to continue.

The CFO talked about the company’s dividend philosophy at the July conference call:

I think I’ve been on record many times now in talking about our financial priorities, and the first one really is to sustain and grow the dividend. And we did show a dividend increase here in the second quarter of 8%.

Here is one fair value analysis based on the numbers. Fair values are based, in part, on the following: discounted cash flow, a modified Graham’s intrinsic value formula and a P/E analysis. ….  Continue reading the full article at SA


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