Holding Our Breath on Chevron (CVX)

Today we logged into our Computershare account and noted a nice $136.55 ($1.07 per share X 127.620753 shares) payment from Chevron (CVX). We’ve stated before that the very first time a company stops increasing their dividend, we’re dumping them. That is the only time we sell a company aside from corporate events or in some cases a strategic decision to replace one stock in a particular industry with another in the same industry because the Q-Scores are relatively different enough to merit the swap. In the case of Chevron, there have been 10 dividend payments in a row with no raise so why haven’t we dumped them? Here’s why. Take a look at the yearly dividends per share paid from Chevron so far as seen below:

  • 2013: $3.90
  • 2014: $4.21
  • 2015: $4.28
  • 2016: $3.21 + Q4 Dividend

In order for Chevron to have increased their dividend in 2016, they need to pay us just one penny more which would be $1.08 per share. That’s all they need to do in order to continue their track record and stay in our portfolio.

Some Seeking Alpha pundits say that now is the time for the company to break their track record and cut the dividend. The logic here is that investing the money in CAPEX makes more sense for investors since it will enable the future growth needed for us to receive growing dividends in the future. We don’t get involved in these debates because our strategy is a simple one. If a company cuts their dividend, we dump them.

So what happens in Q4 seems to be that either CVX cuts their dividend or they increase it by 1 penny. If CVX cuts the dividend, we’re going to have to revisit our industry analysis exercise and take a look at perhaps adding Helmerich & Payne (HP) even though they fall under our $10 billion threshold. We’re getting to far ahead of ourselves though. Right now we’re holding our breath for the next CVX dividend payment with hopes that they increase it by 1 penny and we can then not have to worry about swapping out this position.

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