The timing of the announcement couldn't have been any unluckier. In early March, before the novel coronavirus outbreak turned into a global pandemic and OPEC opted to keep pumping oil at its previous pace, crude prices were tepid but at least stable. Chevron (NYSE:CVX) had every reason to believe it would be able to fund up to $80 billion worth of dividends the company suggested were in store over the course of the coming five years. Since then, the price of West Texas Intermediate (WTI) oil has fallen by more than $23 per barrel, to roughly $24. The price of Brent crude has slipped to a value of around $33. It's unlikely CEO Michael Wirth saw the world change as it has in just the past three weeks.
The 2015 oil meltdown serves as an example of what can happen when a dividend is arguably over-prioritized. Chevron maintained its dividend in the midst of that nightmare, but long-term debt grew from less than $28 billion at the end of 2014 to $33.6 billion by the end of 2015, while its cash and near-term receivables fell by $5.6 billion. Its cash balance fell again in 2016, and debt grew again as well. Moving into this sort of fiscal scenario makes it trickier to invest in growth once oil prices recover, which in the end has the potential to limit future dividend growth. In simplest terms, everything is a trade-off. Your job as an investor is just making sure the trade-offs are worth it for the long haul. This one may not be.
Source: Motley Fool
Related Articles:
- If Only I Had Known About These Dividend Stocks...
- 12 Dividend Stocks and 3 ETFs To Balance Your Asset Allocation
- 3 Communications Services Stocks With Increasing Dividends
- 4 Stocks With Room To Grow Their Dividend
- 6 Stocks That Have Paid Dividends For Over 100 Years
Sorry, Chevron Shareholders, but That "Very Secure" Dividend May Not Be So Safe
Posted by D4L | Friday, April 10, 2020 | ArticleLinks | 0 comments »________________________________________________________________
Subscribe to:
Post Comments (Atom)
~
Popular Posts Last 30 Days
-
As a relatively new blogger, the one thing that has stood out in my mind is the number of Canadian bloggers in the areas that I am most inte...
-
In short, dividend-bearing stocks are one of the smartest approaches stock investors have available currently. The same is true in strong ec...
-
Finding cheap dividend stocks is critical for another reason. By the time the Federal Reserve meets for the second time in 2023, the central...
-
Investing in passive income can allow you to make money with minimal portfolio management. There are many types of investments to make passi...
-
Many companies make very predictable fixed dividend payments each quarter. When they do, their investors have a pretty good idea of how much...
-
As 2022 wraps up, many investors are likely looking for ways to position their portfolio for more macroeconomic uncertainty next year. After...
-
If your growth-investing days are over (or nearly so) and you're more interested in steady income, start your search with all-weather st...
-
Dividends drive significant returns for Berkshire Hathaway's portfolio. One common theme of Warren Buffett's Berkshire Hathaway is d...
-
With inflation appearing to have peaked and fears of a recession dimming somewhat, investors have some positive catalysts to look forward to...
-
Dividends can be an underrated source of income for investors. With so much volatility in the stock market right now, it can be comforting t...
0 comments
Post a Comment
Post a Comment
Note: Only a member of this blog may post a comment.