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Text Size
Mar.25
7:36 PM ET
Wednesday, 25 Mar 2009
Trust in Chevron’s Dividend

Here’s the big theme on Mad Money this week: Companies that can raise their dividends are probably the only worthwhile investments right now. The key then is to find these companies.

That’s where Cramer comes in. On Monday and Tuesday, he picked apart Air Products [MOS  Loading...      ()   ] and Procter & Gamble [MOS  Loading...      ()   ] to show viewers how they work. It didn’t matter whether the company had just raised its payout (APD) or was in position to (PG). The takeaway was that these firms could do it at all in this market. To Cramer, that’s an investable sign of strength.

Who’s next on the list? Cramer’s favorite stock in the oil patch: Chevron [CVX  Loading...      ()   ]. The oil business throws off a lot of cash, making it a logical place to look for dividends. Not to mention, it’s only a matter of time until the market realizes how short a supply of crude we have. That’s Cramer’s take anyway, and he sees it as a driver for the entire sector.

Even in these bullish circumstances for oil, Chevron still stands out. The company leads the industry in all the most important metrics: production growth, reserve replacement rate and project pipeline. Plus, the balance sheet is clean, with plenty of cash and virtually no debt. That puts Chevron in position to raise the dividend should they choose to do so. While Cramer doesn’t expect as big an increase as we’ve seen over the past five years – 12% annually – he does think the company will maintain its tradition of offering at least some dividend boost.

Cramer recommended waiting for CVX to pull back to $65, which would put the dividend yield at 4%, before buying. Then continue to build a position on a descending scale: at $57.80 when the stock yields 4.5%, again at $52 when it yields 5% and so on. The investment will most likely return far more than an index fund ever could.





Cramer’s charitable trust owns Chevron.

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