Chevron Corporation (NYSE: CVX) is one of the world’s largest oil and gas companies. Based in San Ramon, California, Chevron has operations across the globe in exploration, production, refining, chemicals manufacturing and more. The company is a Dividend Aristocrat, having raised its dividend annually for over 30 consecutive years.
For income-oriented investors, Chevron offers an attractive dividend that currently yields around 4%. With the company’s pending acquisition of Hess Corporation (NYSE: HES) on track to close in early 2024, Chevron’s dividend has potential to continue growing. Investors looking to generate passive income from dividends may be wondering – how much Chevron stock do I need to earn $500 per month in dividends?
On December 22nd, 2023, Chevron stock closed at $150.71 per share. At this price, CVX pays a quarterly dividend of $1.51 per share. On an annual basis, this equates to $6.04 per share in dividends.
To generate $500 per month in passive income from CVX, an investor would need to own approximately 993 shares. This is calculated by taking the annual dividend target of $6,000 ($500 monthly x 12 months) and dividing it by the annual per share dividend of $6.04.
993 Chevron shares at the current market value of $150.71 equals a total investment of $149,655. By owning this amount of CVX stock, an investor would earn $1,502 in quarterly dividends, or $500 per month.
For a more conservative goal of $100 monthly in Chevron dividends, approximately 199 shares would be required. At 199 shares with a quarterly dividend of $1.51 per share, the quarterly income would be $300.50. On an annual basis, this would amount to $1,202 in dividend income, or right around $100 per month.
199 shares at today’s stock price equates to an investment of $29,991. Certainly, not all investors have $30,000 or $150,000 available to allocate solely to Chevron stock. However, dividend reinvestment programs allow investors to build up their positions over time.
Rather than receiving the quarterly dividend in cash, investors can choose to automatically reinvest it into buying more shares. This compounds the dividend income over time as the investor accumulates more shares from the reinvested dividends.
Chevron and most major brokers offer dividend reinvestment plans, allowing investors to grow their holdings and dividend income in a disciplined way over the long-term.
It’s also important to note that dividends are not guaranteed payments like interest. Companies can elect to raise, lower or suspend dividends at any time, based on financial performance and other factors.
Chevron’s dividend yield also fluctuates as the share price changes. Currently near 4%, if Chevron’s stock price increases, the yield would fall accordingly. If the price declines, the yield would rise.
For example, at $150 per share the annual $6.04 dividend represents a 4.03% yield. But if the stock climbed to $200 per share, the same $6.04 dividend would equal a 3.02% yield.
Likewise, if the share price fell to $100, the annual dividend would yield 6.04%. So dividend yield can change even when the actual dividend payment remains the same.
In October 2022, Chevron reported strong third quarter financial results including earnings of $11.2 billion. Cash flow remains robust even in a lower oil price environment. This enables Chevron to fund capital projects, pay down debt and continue increasing its dividend.
With the FTC recently requesting more details on the pending Hess acquisition, it appears the deal remains on track to close as planned in early 2024. Hess’s assets complement Chevron’s existing portfolio, providing additional scale.
Once integrated, Chevron should be positioned to continue delivering steady dividend growth for income investors. For those seeking to generate $500 or more in monthly passive income, buying and holding quality dividend stocks like Chevron can be an effective strategy.
