Chevron vs. ExxonMobil: Which Oil Dividend Giant Is the Better Buy for Income Investors?

Chevron (NYSE: CVX) is just a little behind ExxonMobil (NYSE: XOM) most of the time. If investing in stocks were a marathon, it would be a bad thing because Exxon would win. But it's a good thing for Chevron that being slightly behind can still make a stock a great investment opportunity. Here's why you'll probably prefer Chevron over Exxon if you're a dividend investor.

Is Exxon the winner?

Exxon and Chevron are both integrated energy companies with globally diversified asset portfolios. However, Exxon is the larger business, with a market cap of nearly $600 billion. Chevron's market cap is roughly $350 billion. That said, both are among the world's largest energy companies.

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Exxon's return on capital employed (ROCE), a measure of how well a company invests its capital for shareholders, is higher than that of Chevron. Chevron sometimes jumps into the lead, but it normally lags just a little.

Still, their ROCE trends are very similar, rising and falling at roughly the same times. And Chevron's ROCE is typically within the normal range of the peer group, noting that Exxon isn't the current industry leader on this metric.

Exxon has the strongest balance sheet among its peers, with a debt-to-equity ratio of around 0.17x. Chevron's leverage is the second lowest at around 0.22x.

Exxon is clearly in a better financial position, but both companies have rock-solid balance sheets. And both have the leeway to take on debt during market downturns to support their businesses and dividends until energy prices recover.

Exxon's business strength has shone through in its streak of 43 consecutive annual dividend increases. That's better than Chevron's 38-year streak. Once again, Chevron is trailing Exxon, but it's hard to complain about a dividend streak as impressive as Chevron's.

The yield could be the determining factor

There is one important dividend-investing factor where Chevron comes out ahead. Chevron's dividend yield is roughly 3.9% compared to Exxon's 2.9%. If you're trying to maximize the income your portfolio generates, Chevron should probably be your pick, given the similarities between the two companies. Not only is the yield a full percentage point higher, but that difference translates into an income boost of around 33%.

To be fair, you could pick Exxon or Chevron as your energy stock, and you'd likely be making a good choice. However, if your focus is on yield, the clear winner in this matchup is Chevron.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chevron. The Motley Fool has a disclosure policy.