Chevron Corp. (CVX) is the world’s fourth largest oil company. They have a long history of dividend growth as they have paid increasing dividends to shareholders for 26 years in a row.
Chevron is one of my top 35 dividend growth stocks, so I was interested to see how an investor would have fared owning shares of Chevron over the past 10 and 20 years.
A 10 Year Investment in Chevron
Let’s take a look and see how you would have fared if you invested $5,000 in Chevron stock exactly 10 years ago. On August 26, 2003 you would have been able to purchase roughly 69 shares of Chevron for $4,981.80 at a closing price of $72.20. Since the purchase date there has been one 2 for 1 stock split giving you a current share count of 138. The most recent closing price of CVX was August 26, 2013 when CVX closed at $118.84. Today your 138 shares would be worth roughly $16,399.92 for a return of 229% or a compound annual growth rate of 12.65%.
Market returns have been pretty good for Chevron investors over the last decade, but lets not forget about the dividends you would have received during those 10 years as well. Over the course of the past 10 years you would have received a total of $3,511.41 in dividend income. This means that your total return over the past decade of owning Chevron stock has been 300% or 14.86% compounded annually. I don’t know about you but I would be pretty pleased earning a 14.86% annually compounded return over the past decade.
So over the past 10 years while owning shares of one of the world’s largest oil companies you have enjoyed a 14.86% compounded annual return. You have been paid in cash dividends $3,511.41. You could have used that dividend income to pay some bills, travel, attend sporting events, donate to charity or anything else you’d like. Or you could have reinvested those dividend payments and your total return would have been even better.
A 20 Year Investment in Chevron
A 10 year investment in Chevron turned out pretty good for shareholders. How about a 20 years investment? Lets take a look at how you would have fared had you invested roughly $5,000 in Chevron stock 20 years ago. On August 26, 1993, CVX stock closed with a price of $92.87. You would have been able to buy 53 shares for a total price of $4,922.11. Since that date there were two 2 for 1 stock splits. Today you would have a total of 212 shares worth a total value of $25,194.08. This would give you a return of 412% or 8.51% compounded annually.
Once again don’t forget about all the dividend income you would have received over the past 20 years just for being an owner of Chevron shares. Over the past 20 years you would have received a total of $7,903.41 in dividend income from Chevron. This means that your total return over the past 2 decades of owning CVX stock has been 572% or 10% compounded annually.
So a 20 year investment in Chevron Corp. earned you a total return of 10% compounded annually which is pretty phenomenal. You would have received $7,903.41 in dividend income to either offset your expenses or reinvest in the company. Had you reinvested in more Chevron stock your returns would have been even better.
A 10 or 20 year investment in the Chevron oil company would have turned out really good for investors. Investors would have done very well with an investment in Chevron over the past two decades. Currently, Chevron pays a very decent dividend yield of 3.30% and trades at a P/E of just under 10.
I want to point out that I am not taking into account the company’s valuation 10 or 20 years ago. I am merely looking at how you would have fared if you had purchased the stock exactly 10 or 20 years ago. If the company was overvalued at the time of your purchase, your returns will generally be lower. If the company was undervalued at the the time of your purchase, returns generally will do well. Stock valuation at the time of purchase is one of the most important things to take into consideration. Even a great investment will not turn out great if you pay too much for it.
What do you think? Do you own Chevron stock? Would you have been happy with these returns over the past couple decades? Where do you see this company going in the future?
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