All It Takes is $3,000 in Chevron to Generate Hundreds in Passive Income
Key Points
Chevron's dividend yield is more than three times higher than the S&P 500.
The oil giant has increased its dividend each year for nearly four decades.
It has plenty of fuel to continue growing its high-yielding dividend.
Chevron (NYSE: CVX) is a dividend-paying juggernaut. The oil giant recently hiked its dividend payment by 4%, extending its growth streak to 39 consecutive years. The company currently has a 3.9% dividend yield, more than three times the S&P 500's level (1.2%).
The high-yield dividend stock enables investors to generate lots of passive income. All it takes is a $3,000 investment in Chevron to generate hundreds of dollars in passive income in the coming years.
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Image source: Getty Images.
A high-octane income stream
Chevron increased its quarterly dividend payment by 4% this year to $1.78 per share ($7.12 annually). If you invested $3,000 in Chevron, you could buy 16 shares at the current price of around $185 each. That would enable you to collect $113.92 in dividends over the next year ($28.48 each quarter). If Chevron simply maintained its current dividend rate, you'd collect $569.60 in dividend income over the next five years.
However, barring a collapse in crude oil prices, Chevron will most likely continue increasing its dividend. It currently has the second-longest dividend growth streak in the oil patch behind ExxonMobil's 43 consecutive years. The company has grown its payout at a peer-leading 7% compound annual rate over the last quarter-century.
If we assume a more modest dividend growth rate of around 4% annually (matching this year's raise), here's how much dividend income you could collect from Chevron over the next five years:
|
Annual dividend rate |
Annual dividend income |
|
|---|---|---|
|
Year One |
$7.12 |
$113.92 |
|
Year Two |
$7.40 |
$118.48 |
|
Year Three |
$7.70 |
$123.22 |
|
Year Four |
$8.01 |
$128.14 |
|
Year Five |
$8.33 |
$133.27 |
|
Cumulative |
$617.03 |
Data source: Author.
Incidentally, that's a lot more income than you'd generate from a $3,000 investment in ExxonMobil.
Plenty of fuel to continue growing its dividend
While Chevron's historical track record of increasing its dividend doesn't guarantee it will continue to grow the payout, it shows the priority it places on dividends. However, history alone isn't the primary factor driving the view that Chevron will continue growing its dividends. The company's financial profile and outlook more than support this expectation.
Chevron generated $16.6 billion in free cash flow last year, delivering industry-leading growth despite falling oil prices. The oil giant got a big boost from recently completed major growth projects and its acquisition of Hess. Chevron produced more than enough cash to cover its dividend payments ($12.1 billion in 2025). That was part of the $27.1 billion in cash it returned to shareholders last year. It funded the difference with its fortress balance sheet.
The company expects its free cash flow to surge by $12.5 billion this year, fueled by expansion projects, the Hess acquisition, and its structural cost-savings initiatives. Meanwhile, Chevron anticipates that its free cash flow will grow at a more than 10% compound annual rate through 2030 (assuming oil averages $70 a barrel, which is right below the current price point), fueled by major growth projects. That should give it plenty of fuel to increase its dividend, which will likely grow much faster than 4% each year.
An excellent income stock
Chevron has a terrific record of increasing its high-yielding dividend, which seems likely to continue. That makes it a great stock for those seeking to generate passive income.
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Matt DiLallo has positions in Chevron. The Motley Fool has positions in and recommends Chevron. The Motley Fool has a disclosure policy.
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