Ah the Dividend

Borrowing billions of $$s to pay a dividend!? Cutting budgets, projects and heads to pay a dividend!? So why all the need to keep investors happy? To my knowledge, CVX does not issue new shares of stock to fund ongoing operations. I guess the real incentive to 'keep shareholders happy' is that some of those shareholders happen to be corporate VPs and the like who's compensation is heavily based on stock options / incentives. If the stock price fell to say $50/share, would the company have to reduce budgets? Of course not, but the CEO's compensation would only be a measly $1-2 MM in salary.

P.S. Berkshire Hathaway seems to do ok for their shareholders without paying dividends. I guess Warren has better things to do with his money than distribute it away.

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If Chevron issued more shares of stock, that would only delute the value of all shares issued. That's not good for the current investors who want to at least conserve value and also get the attractive dividend. Chevron got themselves into this quandary by continually increasing the dividend. It's not an easy decision to lower it (or not raise it the in next cycle). As a dividend aristicract with a 20+ year track record, it doesn't want to lose this status. The stock price can tank abruptly if the dividend is cut or not raised when the expected time comes. Chevron is banking on remaining on track with the dividend and praying for oil prices to come back again. Meanwhile, it's a tight rope walk until then. There will be more selling of assets, borrowing money and layoffs to keep up the dividend. In the end, the company will be smaller, but emerge stronger. The future will determine if and how fast the company expands again.

You've got it exactly right. The only 'shareholders' that care about the stock price are the insiders that are hoping their stock options pay off.

Thread regarding Chevron Corp. layoffs

Ah the Dividend

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