DZ Bank revised its outlook on Chevron Corporation (CVX), moving it from “Buy” to “Sell” and lowering its price target to \$130. The shift comes amid mounting concerns over the company’s declining profitability and reduced capital returns to shareholders.
📌 Chevron’s first-quarter net income slid by 36% year-over-year to \$3.5 billion, driven by weaker crude oil prices and a one-time tax loss in the United Kingdom. Revenues also disappointed, falling 2.3% to \$47.61 billion and failing to meet analyst forecasts. This marked the first earnings miss in over a year.
📌 Perhaps more telling for investors, Chevron scaled back its stock repurchase program significantly. After buying back \$3.9 billion in shares in Q1, the company plans to reduce that to \$2.5–\$3 billion in Q2. The move is being interpreted as a cautious pivot, suggesting a more conservative stance amid industry headwinds.
📌 While Chevron’s dividend continues to be a bright spot, it now comes with caveats:
💵 Annual Dividend: \$6.84 per share
📊 Dividend Yield: 5.05%
🧮 Payout Ratio: 75.3%
📌 Chevron boasts an impressive 38-year streak of annual dividend hikes, but the elevated payout ratio leaves little margin for future increases if earnings pressure persists. A high yield is attractive, but sustainability could become a concern.
📌 The downgrade reflects a broader worry: slowing earnings momentum, reduced buybacks, and a stretched dividend. For investors, it may be time to reconsider exposure as the energy giant faces a tougher road ahead.