Chevron (NYSE: CVX) has been a fantastic income stock over the years. The oil giant recently extended its dividend growth streak to 38 straight years. That’s a rare feat, considering that only about 80 publicly traded companies in the U.S. have delivered 35 or more years of dividend increases. Chevron’s track record is even more impressive because it operates in the volatile oil sector.
The oil industry’s volatility can scare off some income investors. However, Chevron has proven that it pays a durable dividend that can withstand the oil sector’s wild swings. The company is in an excellent position to continue increasing its high-yielding dividend (a 4.5% current yield compared to 1.2% for the S&P 500) in the future. Because of that, income-seeking investors won’t want to overlook Chevron’s payout.
Chevron operates a globally integrated energy business. It produces oil and gas (upstream), manages midstream energy infrastructure to transport, process, and store some of its production, and owns downstream chemicals and refining assets. This strategy helps Chevron maximize the value of its production and acts as a natural hedge against commodity price fluctuations (downstream businesses benefit from lower prices). As a result, Chevron produces steadier cash flow than peers focused solely on the upstream segment of the oil market.
Last year, Chevron produced $31.5 billion in cash flow from operations. That was more than enough money to cover its capital spending ($16.4 billion), enabling it to produce about $15 billion in free cash flow. That excess cash easily covered the oil company’s dividend outlay of $11.8 billion.
Chevron returned all its remaining excess free cash flow — and then some — to shareholders by repurchasing $15.2 billion of its shares (retiring 5% of its outstanding shares). That brought its total cash returns to a record $27 billion last year. The company covered the deficit with its strong balance sheet and asset sales — $7.7 billion from selling its Canadian assets and some non-core positions in the U.S.
Even with those massive cash returns, Chevron maintained a strong balance sheet. “The balance sheet is in excellent health, with net debt below our historical levels,” stated CFO Eimear Bonner on the company’s fourth-quarter conference call. The oil giant ended the year with a net leverage ratio of 10%, well below its 20%-25% target range.
Chevron’s strong financial profile has allowed it to grow its dividend at a healthy pace. It increased its payout by 5% for 2025. “Over the past five years we have grown our dividend faster than the S&P 500 and nearly double the rate of our closest peer,” said the CFO on the conference call. That above-average growth rate should continue.
