Scott Levine, The Motley Fool
5 min read
In This Article:
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With a $256.7 billion market cap, Chevron is one of the largest energy companies.
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Chevron has robust operations found throughout the energy value chain.
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There are valid arguments regarding the bull and bear cases for Chevron stock.
From the imposition of tariffs to the fear of a recession to the escalation of military conflicts around the world, there's been no shortage of catalysts contributing to the wild price fluctuations in energy prices through the first half of 2025. Despite the volatility, the oil benchmark West Texas Intermediate has essentially returned (as of June 19) to the level it was at when 2025 began.
Investors, consequently, have questioned if now's a good time to fuel their portfolios with some energy exposure -- especially with a position with an energy industry stalwart like Chevron (NYSE: CVX).
But merely because Chevron, with a market cap of $256.7 billion, is an industry leader -- it's one of the largest energy companies based on market cap, in fact -- doesn't mean that it's a definite buy. Let's try to drill down, therefore, and see if today is a good time to click the buy button on Chevron stock.
Chevron stock advocates will point to a number of points that illustrate why shares of the oil supermajor are so appealing right now. For one, the company operates throughout the energy value chain, which helps mitigate the risk of any one of its businesses -- from exploration and production to refining -- hitting a downturn.
The upstream business is especially robust, and it's expected to continue contributing to Chevron's strong financials. Including the growth of its TCO joint venture in Kazakhstan as well as producing assets in the Permian Basin and Gulf of America, Chevron projects its upstream business will contribute $10 billion in incremental free cash flow in 2026 if oil benchmark Brent Crude averages $70 per barrel, or $9 billion if Brent Crude averages $60 per barrel.
The company's strong free cash flow reinforces another great feature of Chevron stock: the dividend. For 38 consecutive years, Chevron has hiked its dividend higher -- a noteworthy feat since management accomplished this throughout the financial crisis and the challenges of the COVID-19 pandemic. This sincere dedication to rewarding shareholders bodes well for those on the prowl for a resilient passive income play. With a 4.6% forward dividend yield, Chevron stock is certainly attractive, but even more so in light of management's conservative approach: Chevron's payout ratio has averaged 68.4% over the past five years.
