Boston, MA 04/15/2014 (wallstreetpr) – Shares of Chevron Corporation (NYSE:CVX) declined in the past week when the company announced possible negative impact on its earnings for the first quarter. That was expected as investors typically have little time for companies that warn over their earnings.
However, for dividend focused investors, the decline in the stock price should be celebrated as it provides a cheap entry opportunity into a company with favorable dividend and shares buyback history.
Weak first quarter earnings
Chevron Corporation (NYSE:CVX) warned that its fiscal 2014 first quarter earnings will be weaker than the fiscal 2013 fourth quarter. The company cited impact from foreign exchange rates and charges related to the mining unit. On that basis, the company expects to suffer $100 million in relation to the unfavorable foreign exchange rates in the first quarter. In the fourth quarter of fiscal 2013, the company benefited from favorable currency exchange rates, reporting $200 million positive impact.
As concerns environmental charges, the company warned of higher impairment costs between $400 and $500 million, which is mostly linked to its mining activities.
All is not lost
Although Chevron Corporation (NYSE:CVX) expects to report a weaker first quarter than the previous quarter, there is no cause for alarm. The company’s strong cash flow position and solid balance sheet means that it has the firepower needed to attain future growth. The company can afford big investments, acquisition and strategic partnerships to improve its revenue, earnings and cash flow position. Also, the company’s global investment is a source of strength in that diversification ensures that troubles in one market are offset by growth in another market. The company currently has 75 percent of its production outside of the U.S., suggesting good diversification approach.
Moreover, the company’s decent dividend yield and dividend growth history makes it a favorable pick for dividend-oriented investors. The company has been able to increase its dividend amount for 26 straight years now. It currently has a dividend payout ratio of 35.2 percent. The company also returns a significant amount of its profits to shareholders in the form of a stock repurchase. It spent $5 billion in 2013 through stock repurchase.