DIVIDEND STOCKS

Chevron HPVS.

Dividend Yield: The dividend yield is a ratio that divides a company’s annual dividend per share by its share price. For example, Chevron’s annual dividend per share is $4.28 and its shares cost $96 each. Thus, its dividend yield is 4.5%. From the perspective of income-seeking investors, a higher yield is generally better than a lower yield.

Chevron takes the nod when it comes to dividend yield. Its shares yield 4.5% compared to HP’s 2.6%.

Chevron HP0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

4.5%

2.6%

Dividend Growth: While the current dividend yield is important, it says little about what investors can expect from a dividend stock in the future. To get a sense for this, you look at the growth rate of a company’s dividend. In the chart below, for instance, we look at the change in these companies’ dividends (ttm) over the past decade.

Chevron comes out on top, with a 10-year dividend growth rate (ttm) of 145% compared to HP’s 105%.

20152014201320122011201020092008200720062005$0.00$0.50$1.00$1.50$2.00$2.50$3.00$3.50$4.00$4.50

Chevron HP

Dividend Payout Ratio: The dividend payout ratio measures the percentage of a company’s net income that’s distributed each year to shareholders via dividends. There’s nothing wrong with a high payout ratio, but it does limit future dividend growth. For our purposes, then, a lower ratio is preferable to a higher ratio.

HP prevails here, with a dividend payout ratio of 26.7% compared to Chevron’s 66.1%.

26.7%

HP

66.1%

Chevron

Tallying the score: When all three of these dividend metrics are considered together, Chevron prevails as the clear winner, earning top honors to two out of the three categories.

This analysis shouldn’t be interpreted as the final word on either of these stocks, but rather as a starting point for further analysis.

Dividend Yield

HP

Chevron

Dividend Growth Chevron

Dividend Payout Ratio

Metric Best Stock

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