Chevron Corporation: A Moderate Buy

Investors that want to gain access to a stable, slowly growing dividend from a "Dividend Aristocrat" energy company may want to consider Chevron Corp. (CVX). The energy company has raised its dividend for decades and pulls in a mountain of free cash flow each year. Chevron Corp. recently failed to acquire Anadarko Petroleum Corp. (APC), but nonetheless gets a $1.0 billion break-up fee. Shares are moderately valued and offer investors a 3.9 percent entry yield.

Chevron Corp.'s share price has been highly correlated with changes in crude oil prices in the last three years, which makes sense: The higher energy prices go, the bigger the earnings and FCF impact for Chevron Corp. Chevron Corp. is not really a bargain, in terms of valuation, but it is a sleep-well-at-night energy company with an impressive dividend history and FCF upside in a rising oil environment. While the valuation is moderate, the dividend has a high degree of sustainability and the yield on cost should rise going forward.

Source: Seeking Alpha

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