North South University

Fin 440
Topic: Chevron Corporation (3rd position at fortune 500) Submitted To:
Dr. Syed Abdullah Al Mamun Associate Professor School of Business North South University

Submitted By:
Md. Shahin ID: 082 196 030 Section: 06

Introduction:
Chevron Corporation is an American multinational energy corporation headquartered in San Ramon, California, United States, and active in more than 180 countries. It is engaged in every aspect of the oil, gas, and geothermal energy industries, including exploration and production; refining, marketing and transport; chemicals manufacturing and sales; and power generation. Chevron is one of the world's six "super major" oil companies. For the past five years Chevron has been continuously ranked as one of America's five largest corporations in the Fortune 500 and it is currently ranked in eighth place. In 2011 it was named the 16th largest public company in the world by Forbes Global 2000. Chevron is one of the largest corporations in the world by revenue. Dividends are payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders.[1] When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business, or it can be distributed to shareholders. There are two ways to distribute cash to shareholders: share repurchases or dividends. Many corporations retain a portion of their earnings and pay the remainder as a dividend. A dividend is allocated as a fixed amount per share. Therefore, a shareholder receives a dividend in proportion to their shareholding. For the joint stock company, paying dividends is not an expense; rather, it is the division of after tax profits among shareholders. Retained earnings (profits that have not been distributed as dividends) are shown in the shareholder equity section in the company's balance sheet - the same as its issued share capital. Public companies usually pay dividends on a fixed schedule, but may declare a dividend at any time, sometimes called a special dividend to distinguish it from the fixed schedule dividends. ROA: An indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. Calculated by dividing a company's annual earnings by its total assets, ROA is displayed as a percentage. Sometimes this is referred to as "return on investment". The formula for return on assets is:

Chevron Corporation* Declared 4Q 10/31/2012 3Q 07/25/2012 2Q 1Q 04/25/2012 01/25/2012 4Q 3Q 2Q 1Q 4Q 3Q 2Q 1Q Record 11/16/2012 08/17/2012 05/18/2012 02/17/2012 11/18/11 08/19/11 05/19/11 2/16/11 11/18/10 8/19/10 05/19/10 2/17/10 11/18/09 8/19/09 5/19/09 2/17/09 11/18/08 8/19/08 5/19/08 2/15/08 11/16/07 8/17/07 5/18/07 2/16/07 11/17/06 8/18/06 5/19/06 2/16/06 Payable 12/10/2012 09/10/2012 06/11/2012 03/12/2012 12/12/11 09/12/11 06/10/11 3/10/11 12/10/10 9/10/10 06/10/10 3/10/10 12/10/09 9/10/09 6/10/09 3/10/09 12/10/08 9/10/08 6/10/08 3/10/08 12/10/07 9/10/07 6/11/07 3/12/07 12/11/06 9/11/06 6/12/06 3/10/06 Amount $0.90 $0.90 $0.90 $0.81 $0.81 $0.78 $0.78 $0.72 $0.72 $0.72 $0.72 $0.68 $0.68 $0.68 $0.65 $0.65 $0.65 $0.65 $0.65 $0.58 $0.58 $0.58 $0.58 $0.52 $0.52 $0.52 $0.52 $0.45 Type Cash Cash Cash Cash Cash Cash Cash Cash Cash Cash Cash Cash Cash Cash Cash Cash Cash Cash Cash Cash Cash Cash Cash Cash Cash Cash Cash Cash

2012

2011
10/26/11 07/27/11 04/27/11 1/26/11

2010
10/27/10 7/28/10 04/28/10 1/27/10

2009
4Q 3Q 2Q 1Q 4Q 3Q 2Q 1Q 10/28/09 7/29/09 4/29/09 1/28/09

2008
10/29/08 7/30/08 4/30/08 1/30/08

2007
4Q 3Q 2Q 1Q 10/31/07 7/25/07 4/25/07 1/31/07

4Q 10/25/06 3Q 7/26/06 2Q 1Q 4/26/06 1/25/06

2006

4Q 3Q 2Q 1Q

2005
10/26/05 11/18/05 12/12/05 $0.45 7/27/05 8/19/05 9/12/05 $0.45 4/27/05 5/19/05 6/10/05 $0.45 1/26/05 2/16/05 3/10/05 $0.40 * Effective August 10, 2005, Chevron Corporation Corporation Merged. Cash Cash Cash Cash and Unocal

2004
4Q 10/27/04 11/18/04 12/10/04 $0.40** Cash 3Q 7/28/04 8/19/04 9/10/04 $0.80 Cash 2Q 4/28/04 5/19/04 6/10/04 $0.73 Cash 1Q 1/28/04 2/18/04 3/10/04 $0.73 Cash ** 2-for-1 stock split post Sept. 10, 2004 dividend declaration.

2003
4Q 3Q 2Q 1Q 10/29/03 7/30/03 4/30/03 1/29/03 11/18/03 8/19/03 5/19/03 2/14/03 11/18/02 8/19/02 5/17/02 2/15/02 12/10/03 9/10/03 6/10/03 3/10/03 12/10/02 9/10/02 6/10/02 3/11/02 $0.73 $0.73 $0.70 $0.70 $0.70 $0.70 $0.70 $0.70 Cash Cash Cash Cash Cash Cash Cash Cash

2002
10/30/02 4Q 7/31/02 3Q 2Q 4/24/02 1Q 1/30/02

The relationship between D/P ratio and ROA:

Firm performance can be measured by the earnings generated by the company in terms of profitability. There is substantial literature on the relationship between dividend policy and profitability. Dividends are important to shareholders and potential investors in showing the earnings that a company is generating. Healthy dividends payouts thus indicate that companies are generating real earnings rather than cooking books. A study by Zhou & Ruland revealed that high dividend payout firms tend to experience strong future earnings but relatively low past earnings growth despite market observers having a contradicting view. The findings of another study done by Arnott & Asness also revealed that future earnings growth is associated with high rather than low dividend payout. They concluded that historical evidence strongly suggests that expected future earnings growth is fastest when current payout ratios are high and slowest when payout ratios are low. The positive relationship is also driven by sticky dividends combined with mean reversion in more volatile earnings. The temporary increases and decreases in earnings subsequently reversed cause the payout ratio to be positively correlated with future earnings growth. Their robustness check for the mean reversion of earnings suggested that earnings seem to revert to the mean but may revert most strongly in terms of their ratio to dividends. an increase in dividends in a quarter may be the result of the managements policy to keep investors satisfied and prevent them from selling the stock at times when future earnings are expected to decline or current losses are expected to continue. This is a case of rising dividends followed by declining earnings.