Chevron Stock Outlook: Dividend Growth Meets Inflation

Key Points

• Chevron’s 38-year dividend growth and share buybacks position it to keep pace with rising prices.
• Chevron is expanding renewable fuels, hydrogen, RNG, and carbon capture while maintaining strong oil output.
• UBS raised its price target to $197, signaling potential upside of ~20% for Chevron stock.

Concerns about inflation still dominate this market. In April and May, the immediate concern was that the Trump administration's tariff policy would cause a sharp spike in inflation. That hasn’t been the case, although some companies, particularly retailers, continue to report tariff headwinds.

However, the current concerns about inflation center around interest rates. The CME FedWatch tool puts the chance of a 25-basis point rate cut in September at around 87%. However, lower interest rates have a stimulative effect on the economy. That means that inflation will almost certainly increase, including for commodities like oil that have been in check so far in 2025.

That’s good news for a blue-chip stock like Chevron Corp. NYSE: CVX. Here’s another reason. Dividend growth stocks are one of the only investments that give investors an opportunity to keep up with inflation.

Chevron has increased its dividend for 38 consecutive years, putting it in the exclusive category known as dividend aristocrats. However, the company also has a strong track record of delivering share buybacks to shareholders. In the company’s second quarter, Chevron delivered $5.5 billion to shareholders between dividends and buybacks.

Not a Contrarian Play

Energy stocks, particularly oil stocks, have been under pressure for much of the year. The problem with oil has been that companies like Chevron have increased their output for the last 12 months, and the market is well supplied. Plus, investors are concerned that alternative energy still represents an existential threat to oil and gas companies.

Lower interest rates may not immediately spark demand. However, if manufacturing and industrial output increase, that will be bullish for crude. Plus, if consumers get relief in time for the holiday season, it could spark a slight revival in transports, which would also be bullish for oil.

The alternative energy threat is really a win-win situation for Chevron. First, it will be years and more likely decades before the world has enough renewable energy sources to make oil less relevant. Until then, Chevron and other oil companies remain essential for economic growth.

At the same time, Chevron hasn’t been ignoring the alternative energy market. The company continues to spend billions on low-carbon initiatives, including:

• Renewable fuels – Chevron is one of the largest producers of renewable diesel and sustainable aviation fuel in the U.S. It has joint ventures, including with Bunge, to expand feedstock processing and distribution.
• Carbon capture and storage (CCS) – The company is developing CCS projects in California and the U.S. Gulf Coast, with the goal of storing millions of metric tons of CO₂ per year.
• Hydrogen – Chevron is building out hydrogen fueling infrastructure in California and exploring opportunities in heavy-duty transport.
• Renewable natural gas (RNG) – Through partnerships with agricultural operators, Chevron is converting methane from dairy farms into renewable gas for transportation.

Analysts Forecast a Big Move in CVX Stock

Chevron stock is up about 10% in 2025. That approximates its three-year average total return of around 8.8%. It also points to the range-bound conditions that have been in place for Chevron during that time. It’s also a little deceptive because of the spike in CVX stock since early April.

Chevron stock formed a death cross on August 20. However, the stock is stabilizing, and the pattern could be reversed quickly. The bullish sentiment is shared by UBS Group. The analyst firm reiterated its Overweight rating on CVX stock and raised its price target to $197 from $186. That’s an approximate gain of 20% from its consensus price target of $163.95.

The company won’t report earnings until early November. However, it could get a catalyst in the waning days of August. That’s when Chevron expects to receive the final ruling regarding the arbitration over Exxon Mobil’s claims to preemptive rights in the Staebroek block in Guyana. This arbitration was sparked after Chevron announced its merger with Hess, which was finalized in July.