At $87 per share Chevron is valued at a forward PE ratio of over 25. All with oil prices hovering around a seven year low and without any stock buybacks. Shell has a forward PE of 12.5 and XOM has a forward PE of 19.1. Chevron has in the past 5 or 10 years had a more liquids rich portfolio, relatively smaller downstream segment, and higher spending. Chevron is in the middle of the pack as it pertains to debt and Upstream profitability.
What are your thoughts?
@1yuh, when a Company pays a dividend, it is taken straight from free cash. It's true the dividend is often reinvested into the company stock, but it is no longer owned by the company itself, but the investor.
Both the field and office support are needed. Just at the right number and not one extra. Believe it or not that means even some decent people have to go.
But the fields can't carry out CHESM audits, maintain CSOC certification and follow "The Chevron Way" by themselves. The office people are badly needed to carry out these useless tasks.
The job is far from done. They need to cut 60 % of the office staff. The fields can produce without you.
@1zxo - where did you go to school? Be honest.
What's keeping it propped up is CVX has shown investors that they have the gonads to cut the dead wood that needs to be removed before the whole tree comes crashing down from a bunch of excess dead weight!
@1yuh: where did you go to business school? Enron U? Worldcom Tech? Chevron A&M?
Most people just reinvest their dividends back into the company, so the company knows that any money given out as dividends will just be returned to them anyways.
The market value of CVX is determined by future discounted cash flows. The 'market' can see through a high dividend rate not supported by future cash flows. Nobody is going to pay $ 86 a share to get $4.28 in dividends which are not supported by cash earnings way down the road. The new production coming online will likely increase cash flows, but will not earn an adequate return on capital (capex) . Reducing current investments will reduce future production and cash flow. I agree that XOM and CVX are selling at nosebleed levels based on the anticipated low oil prices over the next several years. My guess is that the major investors (mutual funds, ETFs, investment houses) require an energy component. These investors are rotating out of the small US producers and into the big integrated oils. Also energy investments are insurance against a near term Middle East 'event'.
401k match is much less complex (and permanent) to modify. That wil be lowered first.
I agree with those of you who are saying dividend yield. Shell has a higher yield (with a 15% Dutch dividend withholding tax), but cannot maintain it and is being punished for overpaying for BG and for its higher debt load. Exxon is rock solid, but with a lower yield and less upside in the event of a price rebound. That being said, I would be more tempted to go long Shell and/or Exxon than long Chevron at this time.
I don't think I'm over-estimating anything. Chevron is quickly running out of options to keep paying the dividend albatross. Layoffs will only go so far before there's no one left to run the business. Asset sales will only go so far until the remaining assets won't sustain the overhead and profits needed to grow. It's quickly heading to a decision between the dividend and the pension. Always remember the corporate mantra: employees will suffer before the shareholder does. I think the pension is the next area to take a hit.
I think you all are over-estimating the cost of maintaining the pension plan. Also, funding requirements for the pension plan will decrease as interest rates begin to increase.
I tend to agree that cutbacks to the pension plan will come before any cutback to the dividend. The corporate mantra: employees will suffer before the shareholder does.
Eventually, Chevron will virtually gut it's pension plan. They did the same thing after the Gulf merger, for the same reasons, and will not hesitate to do it again.
True. The attractiveness fir the current dividend yield is maintaining the Chevron stock price. Cut the dividend and the stock price will crash overnight. For now there's no choice but to keep the dividend at $1.07, but this is costly to keep up. There is a price to pay for keeping the dividend yield so high. Right now, it's capital spending cutbacks and layoffs. The way I see it, oil prices will continue to remain low for a long time and Chevron will eventually be forced to deal with the dividend or make drastic changes to its pension plan.
Ditto, dividend yield
Forward P/E should be more favorable with several projects coming online in the near future.
Dividend yield