Chevron raises its dividend, but it’s less than expected

Chevron Corp (CVX) announced a 4.0% annual dividend per share (DPS) increase to $7.12 on January 30, slightly below my expectation of a 5% increase to $7.18. CVX shares are up 20% since mid-December. It could be fully rated as it has met my target price. This article will discuss how shareholders can play CVX.

CVX closed at $176.90 on Friday, January 30, up $5.71 (+3.34%) and $24.39 or+16.1% through the year from $152.41 on December 31, 2025.

CVX shares - last 3 months - bar chart — CVX shares – last 3 months – bar chart

Also, from its recent low of $146.75 on December 16, 2025, CVX has risen $30.05, a gain of 20.5% in just one and a half months.

Clearly, investors have been anticipating an increase in the dividend per share (DPS). But only a 4.09% QoQ increase in DPS from $1.71 ($6.84/year) to $1.78 ($7.12)?

I wrote a Barchart article on December 21, 2025, discussing why I thought Chevron would raise DPS by 5% to $7.18. After all, last year it increased DPS by 8 cents per share, or 4.9%, from $1.63 quarterly to $1.71. So it seemed likely to expect a 5% rise to almost $1.80 (ie $1.795, or an increase of about 8 cents).

In addition, Chevron made a statement in its investor day presentation on November 12, 2025 that “Chevron has led its peers in dividend growth per share over the past 25 years with an average annual increase of 7%.”

I discussed this in my Barchart article dated November 23, 2025, “Chevron’s Latest 5-Year Plan Involves Big Dividend Hike: CXX Shares Look Cheap.”

So what happened? Reality happened. Cash flow was lower than expected. Therefore, management kept the dividend increase at the low end of expectations. This could have big ramifications for CVX stock.

Excluding working capital changes, operating cash flow was 15.2% higher at $34.9 billion, compared to $30.3 billion for the full year. However, adjusted free cash flow (FCF), after capex and other adjustments, was 5.2% lower at $20.2 billion versus $21.3 billion.

This decline was worse in the fourth quarter. Adj. FCF was $4.2 billion, compared to $8 billion last year, down 47.5% year-over-year. This can be seen on page 10 of the fourth quarter release.

Q4 and 2025 Adjust. FCF - Chevron Release Jan 31, 2026 - Page 10 — Q4 and 2025 Adjust. FCF – Chevron Release Jan 31, 2026 – Page 10

It was also 40% lower than the $7 billion adj. FCF last quarter (see page 9 of the third quarter release). In other words, this decline, if it continues, could cause a higher dividend increase to take up a larger portion of free cash flow.

For example, assuming about 2 billion shares outstanding (the company has yet to file its 10-Q filing), the new annual DPS of $7.12 will cost Chevron $14.24 billion

That’s up 16.7% from the $12.8 billion the company paid in 2025 (which included at least 1 quarter at a lower quarterly DPS rate of $1.63).

Also, compared to the run rate of $3.4 billion paid out in the fourth quarter (ie $13.6 billion), the $14.24 billion in cash dividends would be 4.7% higher. And, the $3.4 billion in Q4 payouts accounted for 80% of the $4.2 billion awarded. FCF. Therefore, a 4.09% increase in payouts (before share buybacks) could increase this payout ratio.

This may affect the company’s ability to increase its dividend in the future.
As a result, Chevron stock could be at a near-term high. Here’s why.

I wrote in December that the average dividend yield on CVX stock had been 4.2168%. Based on my annual DPS expectation of $7.18, I expected a price target (PT) of $170.21 per action:

$7.18 DPS / 0.042168 = $170.27 P.T

But, the average yield The 5-year dividend yield metric is now slightly below 4.1833%:

Yahoo! Finance …….. 4.12%

Morningstar ………… 4.04%

Seeking Alpha ……… 4.39%

Average survey performance: 4.1833%

This lower performing average could help boost the price target. However, the forward DPS rate is lower than previously expected, so the new PT is slightly lower:

$7.12 DPS / 0.041833 = $170.20

The problem is CVX stock is now $176.90 and has a forward dividend yield 4.02% (ie $7.12/$176.90).

This could imply that the price is overvalued, based on its historical average dividend yield. Moreover, it has risen significantly in a short period at this PT.

Also, CVX is now close to analysts’ price targets. For example, Yahoo! Finance’s survey of 26 analysts is $177.67 per share, Barchart’s average PT is $175.25, while AnaChart’s survey of 19 analysts is $208.78.

One way for existing shareholders to play this is to sell out-of-the-money call and put options, to collect income and potentially profit if the stock remains in a trading range.

For example, look at the expiration period of February 27, 2026. The call option strike price of $185.00 has an average premium of $1.50. This gives a covered call seller a 27-day return 0.85% (ie $1.50/$176.90).

This strike price is +4.578% higher than Friday’s close (ie out of the money or OTM). Therefore, the investor could take this as additional capital gain (although the upside is limited to $185.00).

CVX Calls Expiring February 27, 2026 - Barchart - As of January 30, 2026 — CVX Calls Expiring February 27, 2026 – Barchart – As of January 30, 2026

Similarly, out-of-the-money (OTM) put options in this expiration period have good returns.

The $170.00 sell, i.e. with a distance of 3.90%) has a midpoint premium of $2.19, providing a 1,288% return (ie $2.19/$170.00). Also, the put strike price of $165 (6.73% OTM) has a midpoint premium of $1.06.

CVX Expires February 27 - Barchart - January 30, 2026 — CVX Expires February 27 – Barchart – January 30, 2026

Additionally, an investor could short the $170.00 put and buy the $165.00 strike price put for a net credit of $1.13. This provides some downside protection for the short seller to protect against any downside if CVX falls below $165.00.

The net credit would be $2.19 to $1.06 or $1.13providing a net return of 0.665% (ie $1.13/$170.00). Also, if CVX looks stable, the investor could sell later to close the buying leg of put options to increase the total return.

The bottom line is that by using options strategies, existing CVX investors can provide some income protection should the stock be near a peak.

As of the date of publication, Mark R. Hake, CFA had no positions (either directly or indirectly) in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. This article was originally published on Barchart.com

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