Chevron’s ugly earnings put focus on Big Oil dividend

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Chevron’s big earnings miss on Friday, underscored by its worst quarterly profit in 13 years, raised a number of questions about the near-term prospects for Big Oil, and perhaps none more pressing than the sustainability of dividend yields.

Chevron posted net income of 30 cents a share on revenue of $40.36 billion, compared with analyst estimates of per-sharing earnings of $1.16 on $30.91 billion in revenue.

The company maintained its quarterly dividend at $1.07 per share in the second quarter, returning $2 billion to shareholders. Chevron hasn’t raised its dividend since Q2 2014 and kept investors guessing as to whether it would do so later this year.

Asked on the company’s conference call whether Chevron would raise the dividend by the fourth quarter, Chief Financial Officer Patricia Yarrington said, “We don’t want to get out over our skis. We want to do it in a manner and at a time that we can do it in perpetuity…. We’ll do it at a time that the financials allow us to get there.”

Chevron said maintaining a strong dividend was its No. 1 priority and the company was committed to covering the dividend from free cash flow in 2017, and not just at the previously stated oil price of $70.

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“We intend to cover the dividend from free cash flow at whatever the ensuing price,” Yarrington said. “That is a firm commitment.”

Chevron Chief Executive John Watson bluntly said the results were “weak,” adding that he was working to slash costs by renegotiating supply contracts. This week, he laid off 2 percent of the company’s staff.