Chevron Hikes Its Dividend - However It is Much less Than Anticipated

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Chevron Corp (CVX) introduced a 4.0% dividend per share (DPS) hike to $7.12 yearly on Jan. 30, barely decrease than my expectation of a 5% hike to $7.18. CVX inventory has risen 20% since mid-December. It could possibly be absolutely valued because it has reached my worth goal. This text will focus on how shareholders can play CVX.

CVX closed at $176.90 on Friday, Jan. 30, up $5.71 (+3.34%), and up $24.39 or+16.1% year-to-date from $152.41 on Dec. 31, 2025.

CVX stock - last 3 months - Barchart — CVX inventory – final 3 months – Barchart

Furthermore, since its latest low level of $146.75 on Dec. 16, 2025, CVX is up $30.05, a 20.5% achieve in only a month and a half.

Clearly, buyers have been anticipating a dividend per share (DPS) hike. However only a 4.09% quarterly DPS hike from $1.71 (i.e., $6.84 yearly) to $1.78 ($7.12)?

I wrote a Barchart article on Dec. 21, 2025, discussing why I assumed Chevron would enhance the DPS by 5% to $7.18. In spite of everything, final yr, it hiked the DPS by 8 cents per share or 4.9% from $1.63 quarterly to $1.71. So, anticipating a 5% enhance to virtually $1.80 (i.e., $1.795, or a rise of about 8 cents) appeared probably.

Furthermore, Chevron had made an announcement in its Nov. 12, 2025, investor day presentation that “Chevron has led its friends in dividend per share development during the last 25 years with a mean annual enhance of seven%.”

I mentioned this in my Nov. 23, 2025, Barchart article, “Chevron’s Newest 5-Yr Plan Implies a Main Dividend Hike – CXX Inventory Seems to be Low cost.”

So, what occurred? Actuality occurred. Money movement was decrease than anticipated. So, administration stored the dividend hike on the low finish of expectations. That might have huge ramifications for CVX inventory.

Excluding working capital modifications, working money movement was 15.2% larger at $34.9 billion vs. $30.3 billion for the complete yr. Nonetheless, adjusted free money movement (FCF), after capex and different changes, was 5.2% decrease at $20.2 billion vs. $21.3 billion.

This decline was worse for This autumn. Adj. FCF was $4.2 billion, vs. $8.0 billion final yr, down 47.5% YoY. This may be seen on web page 10 of the This autumn launch.

Q4 and 2025 adj. FCF - Chevron release Jan. 31, 2026 - page 10 — This autumn and 2025 adj. FCF – Chevron launch Jan. 31, 2026 – web page 10

It was additionally 40% decrease than the $7.0 billion in adj. FCF final quarter (see web page 9 of Q3 launch). In different phrases, this decline, if it continues, might make a better dividend enhance take up a bigger portion of free money movement.

For instance, assuming about 2 billion shares excellent (the corporate has not but filed its 10-Q submitting), the brand new $7.12 annual DPS will price Chevron $14.24 billion.

That is 16.7% larger than the $12.8 billion the corporate paid in 2025 (which included no less than 1 quarter at a decrease $1.63 quarterly DPS fee).

Furthermore, in comparison with the run fee of $3.4 billion paid in This autumn (i.e., $13.6 billion), the $14.24 billion in money dividends can be 4.7% larger. And, the $3.4 billion in This autumn funds took up 80% of the $4.2 billion in adj. FCF. So, a 4.09% enhance in funds (earlier than share repurchases) might enhance that payout ratio.

Which will have an effect on the corporate’s skill to extend its dividend going ahead.
Because of this, Chevron inventory could possibly be at a near-term peak. Here is why.

I wrote in December that the typical dividend yield for CVX inventory had been 4.2168%. Based mostly on my expectation of a $7.18 annual DPS, I anticipated a worth goal (PT) of $170.21 per share:

$7.18 DPS / 0.042168 = $170.27 PT

However, the common yield 5-yr dividend yield metric is now barely decrease at 4.1833%:

Yahoo! Finance …….. 4.12%

Morningstar ………… 4.04%

Searching for Alpha ……… 4.39%

Common survey yield: 4.1833%

That decrease yield common might assist push the worth goal larger. Nonetheless, the ahead DPS fee is decrease than the prior expectation, so the brand new PT is barely decrease:

$7.12 DPS / 0.041833 = $170.20

The issue is that CVX inventory is now $176.90, and it has a ahead dividend yield of 4.02% (i.e., $7.12/$176.90).

That might indicate that the worth is overvalued, primarily based on its historic dividend yield common. As well as, it has moved up considerably in a brief interval to this PT.

Furthermore, CVX is now near analysts’ worth targets. For instance, Yahoo! Finance’s survey of 26 analysts is $177.67 per share, Barchart’s imply PT is $175.25, though AnaChart’s survey of 19 analysts is $208.78.

A technique for current shareholders to play that is promote brief out-of-the-money name and put choices, to gather earnings, and probably profit if the inventory stays in a buying and selling vary.

For instance, take a look at the Feb. 27, 2026, expiry interval. The $185.00 name choice strike worth has a midpoint premium of $1.50. That gives a coated name vendor a 27-day yield of 0.85% (i.e., $1.50/$176.90).

This strike worth is +4.578% larger than Friday’s shut (i.e., out-of-the-money or OTM). So the investor might probably make this as an extra capital achieve (though the upside is proscribed to $185.00).

CVX calls expiring Feb. 27, 2026 - Barchart - As of Jan. 30, 2026 — CVX calls expiring Feb. 27, 2026 – Barchart – As of Jan. 30, 2026

Equally, out-of-the-money (OTM) put choices on this expiry interval have good yields.

The $170.00 put, i.e., with a 3.90% distance away) has a $2.19 midpoint premium, offering a 1.288% yield (i.e., $2.19/$170.00). As well as, the $165 put strike worth (6.73% OTM) has a $1.06 midpoint premium.

CVX puts expiring Feb. 27 - Barchart - Jan. 30, 2026 — CVX places expiring Feb. 27 – Barchart – Jan. 30, 2026

Furthermore, an investor might brief the $170.00 put and purchase the $165.00 strike worth put for a web credit score of $1.13. This offers some draw back safety for the put vendor to guard towards any draw back if CVX falls under $165.00.

The online credit score can be $2.19-$1.06, or $1.13, offering a web yield of 0.665% (i.e., $1.13/$170.00). Furthermore, if CVX seems to be steady, the investor might later promote to shut the put choice buy leg to extend the whole return.

The underside line is that utilizing choices methods, current CVX buyers can present some earnings safety in case the inventory is close to a peak.

On the date of publication, Mark R. Hake, CFA didn’t have (both straight or not directly) positions in any of the securities talked about on this article. All data and information on this article is solely for informational functions. This text was initially printed on Barchart.com

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