Matt DiLallo, The Motley Fool

Sun, May 18, 2025, 12:17 PM5 min read

• Berkshire Hathaway collects over $800 million in dividend income from Chevron.

• The oil giant pays a high-yielding dividend supported by a low-cost business and rock-solid financial profile.

• It has plenty of fuel to continue growing its dividend.

• 10 stocks we like better than Chevron ›

Chevron (NYSE: CVX) is one of the top holdings of Warren Buffett's Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B). Buffett's company owns 6.8% of the oil giant's outstanding shares (118.6 million shares worth $16.7 billion). It's Berkshire's fifth-largest holding at 5.8% of its investment portfolio.

One of Chevron's top investment features is its high-yielding dividend. Buffett's company stands to collect more than $800 million in dividend income from Chevron this year.

Here's why investors who want to generate passive income should take a closer look at this top Buffett stock.

Chevron currently pays its investors $1.71 per share in dividends each quarter ($6.84 annualized). With the oil stock recently trading in the low $140s, it has a 4.9% dividend yield. That's much higher than the average dividend stock (the S&P 500 index's dividend yield is currently around 1.3%).

The oil company's big-time payout is on rock-solid ground. While oil prices can be very volatile, Chevron has a very resilient business. A big factor is its low-cost portfolio of oil and gas resources. It currently has the lowest break-even level for its upstream business in the industry at around $30 a barrel. With crude oil currently in the $60s, Chevron can generate enough cash to cover its dividend payment and capital spending program with room to spare.

Chevron also has an elite balance sheet. The company ended the first quarter with a net debt ratio of 14%. That's at the low end of its peer group and comfortably below its 20% to 25% target range. Chevron's strong balance sheet gives it the flexibility to continue investing capital into growing its business and returning cash to shareholders during periods of lower oil prices.

The oil giant has demonstrated the durability of its dividend over the decades. "We've grown our dividend for 38 consecutive years, through multiple commodity cycles, leading our peers in growth over the last decade," highlighted CFO Eimear Bonner on the oil company's first-quarter earnings conference call.

Chevron is in an excellent position to continue growing its dividend in the future. The oil company currently expects to increase its oil and gas production at around a 6% compound annual rate through next year, fueled by projects in the Gulf of Mexico (also referred to as the Gulf of America in the U.S.), Permian Basin, and Kazakhstan. The company estimates that its investment in growing its high-margin output in those regions will position it to generate an incremental $9 billion in free cash flow by next year at $60 oil.