Oil giant Chevron (CVX 0.01%) is a favorite among yield-seeking investors. Its 4.2% dividend yield, 37-year history of raising its dividend annually, and cash-gushing business give investors confidence it can reward them with significant passive income in the coming years. Here's what to expect in dividends in 2025.
Chevron could hike its dividend
The oil major's current quarterly dividend is $1.63 per share, making an annual dividend of $6.52. Moreover, there's good reason to believe Chevron will raise its dividend again in 2025.
While it's difficult to predict where the price of oil will go (Chevron's earnings, like so much else in the energy sector, are oil-price influenced), the current price of about $73 a barrel (Brent spot price) and the assumptions made on Chevron's investor day 2023 suggest $60 a barrel is needed to profitably grow its upstream earnings per barrel.
In addition, Chevron continues to generate significant amounts of free cash flow (FCF) per share, which easily covers its dividend per share.
CVX Free Cash Flow Per Share data by YCharts
Moreover, provided the price of oil complies through 2025, Chevron's FCF will likely increase significantly in 2025 compared to 2024. That's partly because management recently announced it would cut its capital spending in 2025 by about $2 billion to a range of $14.5 billion to $15.5 billion.
Cutting capital spending will likely improve FCF, and Wall Street analysts predict Chevron will generate $21.1 billion in FCF in 2025 compared to $16.3 billion in 2023. All things being equal, it's more probable than not that Chevron will hike its quarterly dividend of $1.63 in 2025.
