OThere are not even four months in the year. Yet already, Chevron (NYSE: CVX) the stock is up 46% year-to-date (YTD) – far more than any of the other 29 components of the Dow Jones Industrial Average (NYSEMKT: DJIA).

High oil and gas prices only tell part of Chevron’s success story. Here’s what separates Chevron from the rest oil and gas stocks and why it’s still a buy despite its stock price hovering around an all-time high.

Image source: Getty Images.

Performance of Dow stocks in 2022

the DJIA has spent years underperforming the S&P500 and the Nasdaq Compound. And while the index is down 4.9% year-to-date, that’s better than the S&P 500 and Nasdaq Composite, which are down 6.7% and 12.8%, respectively.

Fifteen of the DJIA components – exactly half – are outperforming the index so far this year, while the other 15 are underperforming. Here is a breakdown by company.

Data source: YCharts.

Investors will quickly notice that the stocks that have carried the broader market in recent years, such as Apple, Microsoft, Salesforce, Nike and Home Depot, are all down year-to-date — as companies in the energy, industrials, materials and consumer base sectors are doing quite well.

A well-rounded oil and gas giant

Chevron has a reputation to have the best balance sheet of the integrated oil majorsespecially over the past five years or so, as its capital expenditures have dropped significantly.

CVX Financial Debt to Equity Chart (Quarterly)

CVX Financial Debt to Equity (Quarterly) given by Y-Charts

Chevron has financial debt-to-equity and debt-to-capital ratios below ExxonMobil, BP, Shelland TotalEnergies — a sign that its capital structure is less dependent on debt than those of its peers.

Today’s Chevron is a poor oil major focused on achieving low cost of production it can therefore generate positive free cash flow even when oil is in the $40 a barrel range. This strategy was put to the test in 2020 when West Texas Intermediate crude oil averaged $39.17 per barrel for the year. Sure enough, Chevron lost billions. But he suffered less than his peers.

CLC Net Income Graph (Annual)

CLC net income (annual) given by Y-Charts

A strong performer in good times and bad

Chevron’s stock is a just a few percentage points off its all-time high as oil and gas prices show no sign of falling anytime soon. Russia is one of the largest oil and gas exporting countries in the world along with Saudi Arabia and the United States. But the war in Ukraine led many European countries and the United States to outright ban Russian energy imports or to quickly start looking for solutions to wean themselves off Russian imports, for example by building import terminals for liquefied natural gas in Europe.

If oil and gas prices remain high, Chevron will continue to make outsized profits. But even if prices go down, Chevron has a wide margin of error where he can still do incredibly well. This efficient portfolio is one of the reasons Chevron is a dividend aristocrat and can support its growing dividends and stock buybacks. (A Dividend Aristocrat is a component of the S&P 500 that has paid and increased its dividend for at least 25 consecutive years.)

Chevron’s upside potential and 3.4% dividend yield give it a boost for long-term investors who like a financially sound company and are also interested in generating passive income.

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