Chevron (NYSE: CVX) stock has been at the back of the pack performance-wise over the past year, with a gain of just 2%. ExxonMobil (NYSE: XOM) is up 8% over that span, and Shell (NYSE: SHEL) has gained around 17%. But don’t count Chevron out if you are looking at the energy sector. In fact, that laggard performance might actually make it the most attractive integrated energy stock you can buy today.
What’s Chevron’s problem?
The one word that should be on investors’ lips right now is probably “why.” As in, why is Chevron trailing other integrated energy companies by such a wide margin? One big part of the answer is that Chevron recently inked an agreement to buy Hess (NYSE: HES). But Hess is in a partnership with Exxon on a big capital investment in the oil space. Exxon is attempting to throw a wrench into Chevron’s acquisition by saying it can buy Hess out of that partnership.
CVX Chart
That would make Chevron’s acquisition much less desirable and could even lead to the deal being canceled. Another problem here is that figuring out who’s right could lead to material delays and might require some legal wrangling, which would be costly. This uncertainty has left a cloud over Chevron’s stock, as investors generally don’t like uncertainty.
But that’s not all bad news, since it has left Chevron with a fairly large dividend yield of 4.2% relative to its closest peer Exxon, which is yielding just 3.4%. And while Exxon has increased its dividend for 42 years, it is hard to complain about Chevron’s impressive 37-year streak of annual dividend hikes. Simply put, they are both reliable dividend stocks.
Chevron is better prepared for adversity
That said, while Exxon isn’t financially weak by any stretch of the imagination, Chevron is currently in a better financial position than any of its closest competitors. Notably, Exxon’s debt-to-equity ratio is roughly 0.2 times, while Chevron’s ratio is around 0.15 times. European peers make much greater use of leverage. Chevron has the strongest balance sheet among integrated energy majors. Leverage is important because the energy…
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