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Chevron's Dividend Provides More Attractive Yield Than Exxon

 April 30, 2012 03:37 AM
 


(By R. Chandrasekaran) Oil and gas companies Chevron (NYSE: CVX) and Exxon Mobil (NYSE: XOM) recently announced dividend increases. While Chevron increased its quarterly dividend by 11.11 percent, Exxon hiked its quarterly dividend by 21.3 percent.

Chevron will now pay a dividend of 90 cents a share compared to 81 cents a share paid in the previous quarter. The dividend is payable on June 11 to the shareholders of record on May 18. The stock will be ex-dividend from May 16. The company has been paying a dividend since 1912 and increased the dividend for 19 straight years.

[Related -Boost Your Dividend Yield]

Exxon Mobil, which has been paying a dividend since 1882, has also increased its dividend by 21.3 percent to 57 cents a share from 47 cents a share. For 29 consecutive years, the company has increased its dividend. The dividend will be payable on June 11 to shareholders of record on May 14. From May 10, shares of the company will be traded ex-dividend.

The latest dividend from Chevron offers a 3.10 percent yield, and the five-year average yield is 3.10 percent. The dividend payout ratio is 24.00 percent, lower than its five-year average dividend payout ratio of 29.00 percent. Average dividend growth for three-years and five-years are 6.98 percent and 8.91 percent respectively.

Similarly, Exxon dividend fetches a 2.20 percent yield, slightly higher than the five-year average yield of 2.10 percent. The dividend payout ratio represents 22.00 percent, while the five-year average dividend payout ratio is modestly higher at 25.00 percent. The three-year and five-year dividend growth rate is 5.53 percent and 8.05 percent respectively.

[Related -Chevron (CVX): The Second Biggest Oil Seeker Joins The Dividend Yield Passive Income Portfolio]

Among bonds, five-year U.S. Treasuries bond yield 0.81 percent, while AAA rated Municipal bond offers a 0.76 percent yield, and AA rated Municipal bond provides a slightly higher yield of 1.06 percent. Similarly, five-year, AAA rated corporate bonds fetch a 1.34 percent yield, whereas AA rated corporate bond offers a modestly higher yield of 1.70 percent.

It is quite clear that Chevron and Exxon's dividends offer much higher yield than various other five-year bonds.

Chevron's P/E ratio is 8 versus the industry's 12, which suggests enough room for upside. Its debt to equity ratio is 8 percent compared to industry's two percent. Looking at the returns, Chevron's return in the last year is a negligible 0.47 percent. However, for the three-year and five-year periods, total returns work out to 70.4 percent and 51.2 percent respectively.

Similarly, Exxon's P/E  ratio is 10, whereas industry's P/E ratio is 12. Its 11 percent debt to equity ratio is higher than industry's two percent. In the last 12 months, total return is 3.57 percent. Similarly, for three-years and five-years, the total returns represent 39.3 percent and 19.8 percent respectively.

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