We received $39.55 (36.6204 shares x $1.08) from Chevron (CVX). This is the second consecutive quarter that Chevron (CVX) is paying $1.08 dividends per share. Chevron’s stock price has been gaining momentum in 2016 after OPEC was hinting to cut oil production. In Dec 2016, OPEC’s move to lower oil output pushes world oil price to increase, thus, increasing Chevron’s stock price further. Though recently, Chevron’s stock price has been slightly decreasing due to Saudi Arabia’s surprise increase in oil output and US oil producer’s resistance in cutting oil production. Nevertheless, investors are anticipating better future earnings for Chevron as a result of a high oil price.
The dividend yield is +4%. The dividend yield has an increasing trend from 2014 to 2015 due to Chevron’s falling stock price and a stagnant dividend per share amount (Dividends per share were $1.07 from mid-2014 to Q32016). In 2016, the dividend yield has been decreasing as OPEC was planning to cut oil production. Speculation about OPEC’s plan has pushed Chevron’s stock price to gain momentum, thus, decreasing the dividend yield. Recent oil market news in Q1 2017 has triggered an increased in dividend yield to +4% as Chevron’s stock price decreases. As we analyze the historical trend, the dividend yield movement shows the market volatility in the oil industry.
In Dec 2016, the dividend payout ratio is 1.8. The high dividend payout ratio is due to Chervon’s low Q4 earnings, driven by a decline in revenue as a result of weak global oil demand.
Due to the low oil market price since 2014, the annual dividend growth rate for a 3 year period has been +3.20%, which is lower than the 5yr and 10 yr growth rate. The recent dividend growth rate is only +0.20%.
The oil market has been very volatile since OPEC announced to cut oil production. We expect that global oil prices will still be increasing and the high oil price will benefit Chevron’s earnings. Due to the market volatilities, we expect either no dividend increase or a <1% dividend growth rate by next year.