The Case For and Against Buying Chevron Right Now

Chevron (CVX 0.69%) is one of the world's largest and most diversified energy companies. It has a very attractive 4.1% dividend yield, backed by a multi-decade history of annual dividend increases. It is a strong option for any investor looking to add energy exposure to their portfolio. But the energy sector is in an unusual state today, which can't be ignored.

The big reason to buy Chevron

Chevron is a financially conservative integrated energy giant. With a portfolio spread across the globe and across the entire energy value chain, it is built to survive the sector's frequent swings. The long streak of annual dividend increases is proof of its success as a business. And the lofty yield can help investors stay invested through rough patches, allowing them to focus more on the dividend checks they are collecting than on the stock price.

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It is a good option in the energy sector almost all the time. And if the geopolitical conflict in the Middle East has proven anything, it is that oil and natural gas remain vital to the world's normal functioning. It is a good idea for most investors to have some exposure to energy. Even the most conservative of dividend investors would do well to consider Chevron.

Emotions are trumping fundamentals right now

That said, the conflict in the Middle East has upended the energy market. Investor emotions are pushing oil prices higher and lower in dramatic fashion. That's not actually odd for the energy sector, but Chevron has been warning investors for some time that the industry's fundamentals are worse than many believe.

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NYSE: CVX

Chevron

Today's Change

(-0.69%) $-1.18

Current Price

$171.06

Key Data Points

Market Cap

$343B

Day's Range

$169.93 - $172.25

52wk Range

$142.40 - $214.71

Volume

13.1M

Avg Vol

10.4M

Gross Margin

15.15%

Dividend Yield

4.05%

Even more oil flowing through the Strait of Hormuz won't solve the problem right away. The oil has to move through the global energy system, and the reserves that have been used up will need to be replenished. But investors are reacting like the energy market is already back to its pre-conflict state, anyway. It wouldn't be unreasonable for an investor to view this situation with some trepidation. Waiting to buy Chevron until the global energy system is on a stronger footing could make sense.

The energy sector has always been volatile

To be fair, the energy sector has a long history of being volatile. So there's really no perfect time to invest. In fact, you could argue that the divide between investor perception and market fundamentals that Chevron is pointing out is a buying opportunity. The problem is that more conservative investors may not want to deal with the wild emotional swings driven solely by news flow from the conflict. If that's the case for you, consider revisiting this attractive energy stock after the current Middle East tensions cool down.