FTC reopens, sets aside Chevron-Hess final order
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Yahoo
6 hours ago
- Yahoo
Chevron's Q2 Free Cash Flow Rises - CVX Stock Looks Cheap
Chevron Corp (CVX) reported a 15% increase in free cash flow (FCF) quarter-over-quarter (Q/Q), and following the closing of the Hess acquisition, its FCF outlook is now stronger. Assuming Chevron ups its dividend by 4%, CVX could be at least 10% undervalued. CVX closed at $151.40 on Friday, Aug. 1, after releasing its Q2 results in the morning. This is well off its high of $168.51 on April 1. More News from Barchart The Saturday Spread: How to Use Descriptive Math to Play the Hand, Not the Dealer Get exclusive insights with the FREE Barchart Brief newsletter. Subscribe now for quick, incisive midday market analysis you won't find anywhere else. Moreover, as I discussed in a July 6 Barchart article, shorting out-of-the-money (OTM) put options is a great income play here. More on this below. First, let's look at Chevron's results and an updated price target. Strong FCF Results Chevron reported that its adjusted free cash flow (FCF) was $4.9 billion in Q2, up over +16% over last quarter's $4.2 billion adj. FCF, despite a 10% decline in crude oil prices, according to the company. The FCF adjustment adds back to FCF the net changes in working capital and certain acquisition costs, as seen in the table below from pages 2 and 10 of its earnings release: The fundamental point is that Chevron is squeezing out higher amounts of cash from its operations. Now that the Hess acquisition closed on July 18 (i.e., in Q3), management says its FCF outlook has been extended. The net effect is that Chevron is finally covering its huge dividend and share buyback costs. This can be seen in the company's deck presentation table (page 9): It shows that in Q2 adj. FCF of $4.9 billion was $0.6 lower than the $5.5 billion cost of shareholder payments (i.e., $2.9 billion in dividends plus $2.6 billion in share buybacks). Moreover, this could be covered if revenue and FCF margins play out as expected. For example, the Q2 adj. FCF was 10.3% of its $47.6 billion in quarterly revenue. If this improves by 12% to 11.65%, it could cover annual shareholder returns. Here is why. Let's use analysts' $194.5 billion (according to Seeking Alpha's revenue estimates for 2026): 11.65% x $194.5 billion = $22.65 billion adj. FCF $5.5b div and buybacks x 4 = $22 billion shareholder payments Even if it stays flat at 10.3% adj. FCF margins, the figure would be $20 billion, or less than 10% below shareholder payments. Dividend Yield Target Price The bottom line is that investors can expect CVC stock's high dividend yield of 4.52% (i.e., $6.84 dividend per share / $151.40) could fall, pushing CVC stock higher. For example, Chevron has already announced or paid out 3 of 4 quarterly payments at a $1.71 dividend per share (DPS) rate. Since it has consistently raised its dividend over the last 37 years, let's assume the quarterly DPS rises by 4.1% to $1.78 (i.e., $7.11 annual run rate): $1.71 + ($1.78 x 3) = $7.05 next 12 months (NTM) DPS Morningstar reports that the average yield over the last 5 years has been 4.16% and Yahoo! Finance says it's been 4.33%. Therefore, using an average yield of 4.25%, here is a price target: $7.05 / 0.0425 = $165.88 target price = +9.6% upside That is almost 10% higher than Friday's close of $151.40. Moreover, using an expected $7.11 DPS next year, the price target is 10.5% higher: $7.11/0.0425 = $167.29, and $167.29 / $151.40 = 1.105 = +10.5% upside So, on average, we can reasonably expect at least a 10% higher target price or $166.54. Analysts tend to agree. Analysts Agree CVX is Undervalued Yahoo! Finance's survey of 24 analysts has an average of $165.64, and Barchart's survey is $164.35. However, other surveys show higher prices. For example, Stock Analysis says the average of 14 analysts is $168.14, and which tracks recent analyst recommendations, says that 19 analysts have an average of $184.25 per share. The average of these surveys is $170.60. That is an upside of +12.7%, slightly higher than the +10% upside using historical yield metrics. Nevertheless, there is no guarantee this will happen over the next 12 months. For one, the market needs to see if Chevron's free cash flow improves. As a result, one way to play this is to set a lower buy-in price and get paid. This also allows existing investors to make extra income. Shorting OTM Puts In my Barchart article 3 weeks ago, I suggested selling short (i.e., entering a trade to 'Sell to Open' a put contract at any strike price), the $144.00 strike price expiring Aug. 8. This strike price was just less than 3% below the trading price (i.e., out-of-the-money). How did that perform? At the time, the premium received was $2.41 per put contract shorted, which was a 1.67% yield (i.e., $2.41/$144.00 = 0.0167). As of Friday, that premium had decayed to 21 cents in the midpoint. In other words, the investor has made 91% of that 1.67% yield, and the short-play has been successful. It makes sense to roll this over to a new period. For example, look at the Sept. 5 expiry period. It shows that the $167.00 put option, 2.91% out-of-the-money (OTM), has a $2.65 midpoint premium. That gives a short-seller of the $167.00 put strike an immediate yield of 1.80% (i.e., $2.65/$147.00 = 0.0180) over the next month. This gives the short-seller a lower potential buy-in breakeven of $144.35, or 4.6% below Friday's close. For existing investors, this provides additional income. For example, even after rolling the prior trade over to this new expiry period, the net yield is $2.44 (i.e., $2.65-$0.21), or 1.66% (i.e., $2.44/$147.00). So, over the two periods of 7 weeks, the total income earned would be $485 for an average investment of $14,550. That works out to a 3.33% yield for 7 weeks, or an annualized expected return (ER) of over 23.3% (assuming the same yields can be made 7 times a year). The bottom line here is that this is an additional way to play CVX stock for both existing and new investors. On the date of publication, Mark R. Hake, CFA did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on
Yahoo
11 hours ago
- Yahoo
3 Dividend Champion Stocks I'm Watching in 2025
Key Points AbbVie could be a great stock to buy on the dip if pharmaceutical tariffs cause the shares to fall. Oil price volatility could give investors a great buying opportunity with Chevron. Target could rebound, although the company faces multiple challenges. 10 stocks we like better than Target › What does it take to be a Dividend Champion? A company must increase its dividend for at least 25 consecutive years for its stock to make the list. Nearly 140 stocks meet the criteria right now. Just because a stock is a Dividend Champion doesn't mean it's an overall winner. However, some members of the group could be attractive to investors. Here are three Dividend Champion stocks I'm watching in 2025. 1. AbbVie AbbVie (NYSE: ABBV) isn't just a Dividend Champion; it's a Dividend King. To join this elite group of stocks, a company must increase its dividend for at least 50 consecutive years. AbbVie has increased its dividend for 53 years in a row. And its payout is attractive, with a yield of 3.39%. I'm keeping my eye on AbbVie mainly to see how the stock responds to potential tariffs on pharmaceutical imports to the U.S. President Donald Trump has threatened to levy steep pharmaceutical tariffs. I suspect that the stocks of major drugmakers will tumble if and when those tariffs are finalized. However, I think it would present a great buying opportunity if AbbVie's share price pulls back. TD Cowen analyst Steve Scala believes that the drugmaker would be less affected by those tariffs than many of its peers. I agree with that assessment. While the company has overseas manufacturing operations (primarily in Ireland), it also has an even greater domestic capacity. CEO Rob Michael noted in the May earnings call that its top-selling autoimmune disease drug Skyrizi is one example of a product made in the U.S. In the interim, AbbVie's business is rocking along nicely. The drugmaker beat Wall Street's estimates with its second-quarter results. It expects Skyrizi and Rinvoq to generate combined sales this year that exceed the peak annual sales for Humira, which ranked as the world's best-selling drug for several years before losing exclusivity in 2023. 2. Chevron Chevron (NYSE: CVX) isn't a Dividend King yet. However, it's a longtime Dividend Champion, with 38 consecutive years of payout increases to its credit. The oil stock remains a favorite for income investors with its forward yield of 4.5%. Two key things put Chevron on my radar screen. First, I've been interested in seeing how the acquisition of Hess would unfold. Second, I've wondered what would happen with oil prices this year -- and how the company's share price would be affected. After a legal skirmish with ExxonMobil, Chevron completed its acquisition of Hess on July 18. So far, the stock hasn't moved much on the news. As the company integrates Hess' operations, we may see a delayed impact. Oil prices are down somewhat so far this year. Chevron's shares have held up pretty well, though. If oil prices decline because of slower demand, the stock would likely fall in tandem. I view any sell-off as a buying opportunity for long-term investors, especially income investors seeking to lock in an even juicier yield. 3. Target Like AbbVie, Target (NYSE: TGT) is a Dividend King. The giant retailer has increased its payout for 54 consecutive years. Thanks mainly to its stock sinking over the last 12 months, the company's forward dividend yield of 4.5% is near its highest level ever. Why am I watching Target? I'm waiting for a turnaround. So far, it hasn't materialized. I suspect a comeback will eventually happen, although it might not be this year. Target faces multiple challenges. Some are largely outside of its control. For example, consumer confidence has declined with uncertainty about the impact of the Trump administration's tariffs. But other issues are the result of the company's own moves. In particular, Target continues to face a customer backlash after rolling back diversity, equity, and inclusion (DEI) efforts. On a positive note, the company continues to generate solid profits. Its stock is also valued attractively after the sell-off, with a forward price-to-earnings ratio of 14.2. Should you invest $1,000 in Target right now? Before you buy stock in Target, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Target 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 $625,254!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,090,257!* Now, it's worth noting Stock Advisor's total average return is 1,036% — a market-crushing outperformance compared to 181% 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 July 29, 2025 Keith Speights has positions in AbbVie, Chevron, ExxonMobil, and Target. The Motley Fool has positions in and recommends AbbVie, Chevron, and Target. The Motley Fool has a disclosure policy. 3 Dividend Champion Stocks I'm Watching in 2025 was originally published by The Motley Fool Sign in to access your portfolio
Yahoo
11 hours ago
- Yahoo
2 Warren Buffett Stocks to Buy Hand Over Fist in August
Key Points Warren Buffett is a world-famous investor who uses Berkshire Hathaway as his investment vehicle. In the portfolio of publicly traded stocks he owns, Chevron is a current stand-out for investors. While you can't buy any of the companies directly owned by Berkshire Hathaway, Enterprise Products Partners is a close proxy. 10 stocks we like better than Chevron › Warren Buffett is the CEO of Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B), a massive conglomerate. The company is basically Buffett's investment vehicle, which he uses to buy publicly traded stocks and even entire companies. Here are two high-yield investment ideas from Buffett's portfolio of public and private investments that you may want to buy hand over fist as August gets underway. 1. Chevron's clouds are clearing Chevron (NYSE: CVX) is a large integrated energy company. That means that it has exposure to the entire energy value chain, from the upstream (production) through the midstream (pipelines) and on to the downstream (chemicals and refining). This helps to smooth out the inherent ups and downs of the commodity-driven energy sector. Chevron has a globally diversified portfolio, which allows it to focus its investments and efforts in the areas that offer the highest returns. Overall, it is a well-run business. That said, it has been facing some headwinds over the past few years. The list includes a long-stalled acquisition (Hess) and the fact that its investments in Venezuela had become something of a political football. The stock was out of favor for those reasons, both of which held back growth, and Chevron's dividend yield was much higher than that of its closest peer, ExxonMobil (NYSE: XOM). The merger has now been completed, and the situation around Venezuela, while not solved, is clearer. With the path cleared for improved performance, Chevron, one of the publicly traded stocks Buffett owns, looks like an attractive energy choice. Notably, despite the improving outlook, Chevron's 4.3% yield is still higher than Exxon's 3.5% yield. If you invest for the long term and prefer dividend stocks, following Buffett's lead with Chevron is likely to be a winning choice. It has increased its dividend every year for 38 consecutive years! 2. Buffett loves the midstream, you can buy in with Enterprise Buffett doesn't just buy public companies with Berkshire Hathaway. He also buys entire companies. One area he's invested in quite heavily is the midstream. That makes sense for Buffett, given the reliable cash flows pipeline operators generate from the fees they collect from customers. Basically, customers pay for the use of the energy infrastructure that midstream companies own. Demand for the transportation services provided is more important than the price of the commodities flowing through the pipeline system. You can't invest directly in the midstream business within Berkshire Hathaway, but you can buy a North American midstream giant like Enterprise Products Partners (NYSE: EPD). The big draw here for income investors will be the master limited partnership's (MLP's) lofty 6.9% distribution yield. The distribution backing that yield has been increased annually for 26 consecutive years. That said, there's more to like about Enterprise than just the yield and distribution history. For example, the MLP sports an investment grade rated balance sheet, and its distributable cash flow covers the distribution by a strong 1.7x. There is a lot of leeway for adversity before a distribution cut would be in the cards. On top of that, Enterprise has $5.6 billion worth of capital investments in the works to keep the top and bottom lines growing. While you can't invest directly in the midstream investment Buffett has made, you can buy Enterprise. It is an industry-leading player and a highly reliable income stock that lets you invest "like" Buffett, even if you can't perfectly mimic his investment. Think long term, like Buffett does Here's the key: Buffett buys stocks and then holds them for the long term so he can benefit from the growth of the businesses he owns. If you buy Chevron or Enterprise, don't think about that investment as a short-term play. That would be a misunderstanding of how Buffett thinks. Instead, think of these two high-yield energy stocks as core long-term holdings that will reward you well for sticking around in both good times and bad ones. 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 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 $624,823!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,064,820!* Now, it's worth noting Stock Advisor's total average return is 1,019% — a market-crushing outperformance compared to 178% 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 July 29, 2025 Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and Chevron. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy. 2 Warren Buffett Stocks to Buy Hand Over Fist in August was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
