ExxonMobil vs. Chevron: Which Oil Dividend Stock is the Better Buy for a Lifetime of Passive Income
Key Points
Exxon has increased its dividend for 43 straight years, while Chevron is only a few years behind it at 39 consecutive annual increases.
The oil giants have resilient business models and strong balance sheets, putting their current high-yielding payouts on rock-solid ground.
They should have plenty of fuel to continue increasing their dividends in the future.
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ExxonMobil (NYSE: XOM) and Chevron (NYSE: CVX) are the undisputed dividend heavyweights in the oil patch. Exxon has increased its dividend for 42 straight years, while Chevron has delivered 39 consecutive annual dividend increases. Both oil giants offer above-average current dividend yields (Exxon's is nearly 3% while Chevron's is over 4%, more than double the S&P 500's 1.1% yield).
Here's a closer look at which of these top oil dividend stocks is the better one to buy right now for those seeking a lifetime of passive income.
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Drilling down into these top oil dividend stocks
ExxonMobil and Chevron have similar business models. Both are integrated energy companies that operate upstream oil and gas production businesses, midstream transportation assets, and downstream chemicals and refining operations. That integration helps them maximize the value of every barrel of oil they produce. They also have large-scale, globally diversified operations. These features enable the oil giants to generate less volatile cash flows compared to others in the oil patch.
As a result, they can produce significant cash flows at lower oil prices. For example, ExxonMobil expects to produce $145 billion in cumulative surplus cash between 2026 and 2030 at $65 oil. That will give it the money to steadily return more cash to shareholders through a growing dividend and share repurchases. Meanwhile, Chevron can generate enough cash at $60 oil to fund its capital program, grow its dividend, and repurchase shares at the low-end of its $10 billion to $20 billion annual target range through 2030.
Chevron and Exxon complement their more resilient cash flows with fortress balance sheets. They each have AA- credit, tied for the best credit rating in the oil patch.
With resilient business models, strong cash flows, and fortress balance sheets, both of their high-yielding dividends are on sustainable foundations.
What's the future hold for these top oil dividend stocks?
Exxon and Chevron have laid out clear growth plans through 2030. Exxon expects to grow its annual earnings capacity by $25 billion and its cash flow by $35 billion by 2030, compared with 2024 at the same prices and margins. That implies 13% compound annual earnings growth and double-digit cash flow growth, with even higher per-share growth rates driven by its share repurchase program. Exxon expects to achieve this growth by investing in developing its advantaged assets (those with the highest returns and margins) and by continuing to execute its sector-leading structural cost-savings initiative.
Meanwhile, Chevron expects to deliver more than 10% annual free cash flow growth through 2030, assuming oil averages $70 a barrel. Chevron expects a combination of its Hess merger, expansion projects, and cost savings to fuel its growth plan.
Both oil companies expect to continue growing beyond 2030. In addition to continuing to explore for and develop new oil and gas projects, they're ramping up their investments in new businesses, including lower-carbon energy. Chevron is investing in biofuels (it's the second-largest U.S. producer), renewable natural gas, hydrogen, lithium, and carbon capture and storage. Additionally, Chevron sees an enormous opportunity to build gas-fired power plants to support rising demand by AI data centers.
Exxon is pursuing those same lower-carbon markets and is also seeking to build gas-fired plants to power AI. Additionally, it's building several new businesses around innovative product solutions, including technology-driven Proxxima systems and carbon materials. Exxon believes these new businesses have the potential to reach $13 billion in annual earnings by 2030.
It's a close race
Exxon and Chevron have been two of the best oil dividend stocks to own over the past several decades. They'll likely remain two of the best to hold in the future for those seeking a potential lifetime of passive dividend income. Chevron is the better buy right now for those seeking a higher current income stream, while Exxon is better for those seeking more long-term growth visibility, given its additional new business opportunities.
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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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