As a dividend growth investor seeking early retirement, I invest my time and hard-earned money into buying stocks of great companies paying growing dividends.
During the whole month of november, I couldn’t decide myself to push on the buy button. All of the stocks I had on my wish list appeared highly overvalued… until the black friday!!!
There is a lot of pressure on oil price right now and oil stocks suffer from that pressure. Last friday, in a single day, XOM and CVX both fell by 5% giving me the opportunity to add a couple of shares of a quality stock to my portfolio.
Today, I have bought 8 shares of Chevron (CVX) at 110,55$. This adds 34.24$ to my annual dividend income or 0,09$ per day to my daily dividend income.
A juicy yield
My goal is to get a 3,5% yield on average in my entire portfolio when I buy a stock. The average yield in the S&P500 right now is 2,1%. With a 3,9% yield, CVX is offering a juicy one!
At current price, CVX sells at a p/e of 10 in line with its 5 years average of 10,3. Its price/book, price/sales, price/cashflow are also pretty in line with their 5 years averages which suggest that at current price, CVX is fairly valued.
Morningstar rates it 4 stars, considers it undervalued with a fair value estimate of 132$. So, this leaves a lot of upside potential if their are right!
On the moat side, Morningstar assigns it a narrow economic moat.
Between 2004 and 2014, Chevron has increased its dividend every year from 1,53$ to 4,28$! Not bad! Overall, the revenue has increased, the net income has increased, the number of shares outstanding has decreased and the payout ratio has also increased. But, while it has increased, the payout ratio is still pretty low at 39,4% and is letting room for future dividend growth.
That’s exactly the kind of pattern I seek to build my dividend growth machine!
Based on buyupside.com, Chevron has paid a dividend since 1970 and has increased it almost every year since.
Based on David Fish’s list, Chevron has in fact increased its dividend every year for 27 consecutive years!!! Its 5 years and 10 years dividend growth average rate stand at 9% and 10,6% which is awesome and makes it a stock I definitely want to have in my portfolio.
Overall, I’m pretty happy with that pick. While there is a lot of uncertainty right now about current and future oil price, I don’t think that this society will stop consuming oil before a long long while… So I believe this is a temporary situation and Chevron has seen a lot of other situations like that.
Where do you think that oil price is heading? Do you think these stocks will drop further?
Image courtesy of Stuart Miles / Freedigitalphotos.net