Should You Invest in Chevron?

PHOTO CREDIT: Chevron

OVERVIEW

Chevron Incorporation is a company based in the United States. The company explores for and extracts crude oil and natural gas around the world. It also refines these products into things like gasoline, petrochemicals, and other related products as well. The company was founded in 1879.

Why You Should?

  1. Chevron is a great reopening play in an investor’s portfolio. The company saw a drop in demand for its products as people stayed indoors and as the industrial economy shut down. However, once this pandemic is over and reopenings around the world take place, the company will see strong demand for all of its products again.
  2. The company offers a great dividend for investors looking for a long-term investment option where they can put their money and earn a quarterly income. The company offers a dividend of 5.26% (around $5.36 per stock). This amount is one of the highest in the stock market and the company continues to maintain (if not raise) this amount every year as well.

Why You Should Not?

  1. Chevron faces tough competition in the oil and gas industry. Some of these competitors include Exxon Mobil, BP, Royal Dutch Shell, and many others. This competition might hurt the company and its investors in the future.
  2. The COVID-19 pandemic has negatively impacted the company. As people stayed indoors, the demand for gasoline and other related energy products fell, something that was displayed in the company’s several earnings reports. The demand for petrochemicals also fell as the industrial and commercial economy (construction, etc.) shut down as well.
  3. In my opinion, oil and gas are not the future of the energy industry. This is because of new alternatives that are far more efficient and cheaper than these forms of energy (something that I will talk more about next). Because of these long-term trends, Chevron might not be the best investment for long-term investors as the demand for oil will slowly decrease.
  4. Under a Biden administration, the company and its investors will need to look out for more environmental regulations and other government blocks (like preventing company’s to drill in protected grounds in the country). In addition to this, Biden will look to incentivize and invest in clean energy solutions, negatively impacting companies like Chevron. This will hurt investors as well.
  5. The company faces stiff competition from green energy companies like Tesla, Rivian, Solar City, and many others. Electric vehicles and solar power will drastically reduce the demand for oil in the coming years. It is without a doubt that this is the future of the energy industry, something that will hurt Chevron’s long-term performance.

MY OPINION

I don’t think that Chevron is a great long-term investment due to tough competition, negative impacts from the pandemic, a bad political environment, the negative long-term outlook for oil and natural gas, as well as quickly growing green energy technology. However, the company is still a good reopening play and has a high dividend.

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Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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Aaditya Patel

Aaditya Patel

Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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