Could Buying Chevron's High-Yielding Stock Today Set You Up for Life?

Key Points

• Chevron is one of the largest integrated energy companies on the planet.

• Its stock boasts a lofty 4.3% dividend yield and 38 years of payout increases.

• Chevron's secret weapon isn't its energy business, but its fortress balance sheet.

• 10 stocks we like better than Chevron ›

What most dividend investors want are reliable income streams from well-run companies. Those are easier to find in some sectors, like consumer staples, than others, like energy. This can lead to income investors winding up with a portfolio that's too narrowly focused as they gravitate to the industries with the most consistent dividend stocks.

Chevron (NYSE: CVX) breaks the mold. If history is any guide, it could easily set you up for a lifetime of reliable dividends despite operating in one of the stock market's most volatile industries. Here's what you need to know and why you might want to buy it.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

What's the problem with energy stocks?

Consumer staples companies make things that people need to use regularly, no matter what is happening in the world, the economy, or their personal finances. Think soap and toilet paper, neither of which you'll cut back on buying even during a deep recession.

Energy companies produce something that is vital to the world as well, but oil and natural gas are commodities. Their prices can swing dramatically and quickly as demand shifts -- and demand for energy does shift markedly when macro conditions change. This makes the top and bottom lines of energy stocks highly volatile.

Image source: Getty Images.

That inherent volatility is why many energy companies' dividends are inconsistent -- rising and falling through the economic cycle. But not all energy stocks are created equally. Chevron, for example, has increased its dividend annually for 38 consecutive years. That is an incredible streak given the nature of the sector in which it operates.

And, right now, Chevron's dividend yield is a lofty 4.3%. That's far higher than the skinny 1.2% yield of the S&P 500 index, comfortably ahead of the nearly 3.2% average for energy sector companies. Given its dividend history and attractive yield, it seems very much like Chevron could set dividend lovers up with an attractive income stream for the rest of their lives.

But you need to dig in and understand how Chevron got to this point before you buy it.

What's so great about Chevron?

For starters, Chevron is not just an energy producer. Upstream companies, which only extract oil and natural gas, tend to be highly volatile investments because their sales and earnings are entirely dependent on the prices of the commodities they produce. However, Chevron is an integrated energy company. It operates not just in the upstream segment, but also in the midstream (pipelines and storage) and downstream (refining and chemicals) segments of the energy industry.

Each of those segments operates differently and is impacted differently by changing business conditions. The most dramatic example of that is illustrated by the downstream segment, which uses oil and natural gas as inputs. Lower energy prices can actually benefit downstream businesses even as they put the pinch on upstream operators. Having exposure across the entire energy sector helps to soften the peaks and valleys Chevron goes through as the energy cycle plays out.

This provides Chevron with a solid business foundation to keep paying investors well regardless of what is happening at any given time with energy prices. But there's another important factor to consider. Chevron's balance sheet is one of the strongest within its close peer group, with a debt-to-equity ratio of just 0.2. That low level of leverage isn't just good within the energy sector. It would be good for any company in any industry.

The key takeaway, however, is that Chevron's low leverage gives it more flexibility to take on debt during the inevitable energy industry downturns that come along. That gives it a greater ability to support its business and dividend through the weak patches. When energy prices recover, as they always have historically, it pays down its debt load so that it's prepared for the next rough patch. It isn't a complex business model, but it is a very effective one.

Add Chevron to your list of reliable dividend stocks

Chevron will never have the same kind of reliable business as a consumer staples maker. But if all you buy is consumer staples companies, you won't end up with a diversified portfolio. Chevron shows that you can, indeed, find reliable dividend payers even in sectors that tend to be volatile. All in all, if you are looking to add another stock to your portfolio that can provide a reliable income stream for the rest of your life, you'll probably want to look closely at Chevron.

Should you invest $1,000 in Chevron right now?

Before you buy stock in Chevron, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Chevron wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $651,345!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,080,327!*

Now, it’s worth noting Stock Advisor’s total average return is 1,058% — a market-crushing outperformance compared to 189% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of September 15, 2025

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chevron. The Motley Fool has a disclosure policy.