Chevron (CVX +0.79%), one of the world's largest integrated energy companies, is often considered a reliable blue chip dividend stock. It's involved in upstream exploration and production, downstream refining and marketing, and chemical production.
Chevron pays a forward yield of 3.6% and has raised its dividend annually for 39 consecutive years, even as oil prices have gone through some wild swings. Over the past three years, its stock has risen 22% and generated a total return of 38%, including its reinvested dividends. Will it maintain that momentum over the next three years, or should investors brace for a pullback?
Image source: Getty Images.
What will happen to Chevron over the next three years?
Chevron has a presence in 180 countries, but most of its oil and natural gas comes from the U.S., Kazakhstan, and Australia. Unlike ExxonMobil and BP, which are heavily dependent on the Gulf states, Chevron has a minimal presence in the Middle East.
Therefore, Chevron is generally better insulated from the Iran War than its closest peers. But just like its big oil "supermajor" competitors, Chevron will benefit from soaring oil prices -- which boost its upstream profits, generate more cash for its dividends and buybacks, and improve the economics of its big megaprojects. That's why its stock has rallied more than 30% year-to-date.
Key Data Points
From 2025 to 2028, analysts expect Chevron's revenue and EPS to grow at CAGRs of 2% and 16%, respectively. Most of the growth should come from the expansion of its Tengiz Field in Kazakhstan, which aims to produce about 1 million barrels of oil per day. It will also continue upgrading its largest field in the Permian Basin, which already produces around 1 million barrels of oil per day, using newer, more cost-efficient drilling technologies. It expects to increase its oil and gas production by 2%-3% annually through 2030.
Chevron will also bring new deepwater projects online in the Gulf of Mexico, expand its natural gas projects in Australia, and increase its exposure to Guyana -- one of the world's fastest-growing oil regions -- through its recent acquisition of Hess. To stabilize its margins as it pulls those levers, it plans to cut its structural costs by $3 billion to $4 billion by the end of 2026.
At $200, Chevron's stock still looks reasonably valued at 24 times forward earnings. If it matches analysts' estimates through 2028, grows its EPS by 15% in 2029, and still trades at the same forward multiple, its stock price could rise to about 50% to $300 over the next three years.
But if oil prices stumble, its near-term profit growth could slow down as its valuations decline. If that happens, its stock could merely tread water, but it would remain a reliable dividend stock.
