Shell vs Chevron stock: One clear winner by far

on Jan 4, 2023
  • Chevron and Shell are giant supermajors with a combined market cap of $500 billion.
  • Shell and its European peers have allocated billions in wind, solar, and hydrogen.
  • Chevron is more focused on carbon capture and shareholder return

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Shell (NYSE: SHEL) and Chevron (NYSE: CVX) are some of the biggest oil supermajors with a market cap of over $198 billion and $338 billion, respectively. The two are global operations with assets and partnerships in almost all continents. They are also dividend sweethearts that yield about 3.57% and 3.26%, respectively. In this Shell vs Chevron comparison, I will explain why the latter is a clear winner.

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Shell vs Chevron chart
Shell vs Chevron chart

Chevron is focused solely on shareholders

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There is a big difference between American and European oil and gas majors like BP, Shell, and TotalEnergies. In the past few years, American companies have emerged as more shareholder-friendly compared to their European counterparts.

That is partly because European energy companies tend to cater to both shareholders and climate activists. As such, most of them have invested heavily in “clean” energy projects that they don’t have expertise in. In 2022, Shell made several multi-billion dollar investments in such energy projects.

In December, it completed the purchase of Daystar Power Group, a solar provider. It also won a bid to build an offshore wind power plant in the Netherlands. The company also acquired Green Tie, a Spanish solar power provider. In the UK, it announced plans to buy solar power portfolio from Anesco and bought WestWind, a wind farm.

In addition to solar and wind, the company is also investing in hydrogen. Shell is also facing challenges in the Netherlands, where a judge ordered it to reduce its carbon emissions. 

The reality is that Shell has been compelled by European governments, shareholders, and activists to boost its renewable energy. However, the reality is that some of these projects will take decades to become profitable. 

Chevron has been more prudent on all this by understanding that it is an oil and gas company and not a solar and wind provider. Instead, the company is investing most of its resources on carbon capture technology, carbon offsets, and hydrogen. The CEO is also focused on drilling, as we wrote here. Therefore, in this regard, I believe that Chevron is a better investment than Shell.

Shell vs Chevron valuation and performance

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Another reason why Chevron is a better stock is that it has a longer track record of performance than Shell. Shell share price has dropped by about 20% in the past five years while Chevron rose by more than 40%. In the past 12 months, Chevron rose by 50% compared to Shell’s 30%.

Further, Chevron takes good care of its shareholders. It has a forward dividend yield of 3.26% compared to Shell’s 3.57%. While Shell’s yield is bigger, Chevron has a four-year average of 4.55% vs Shell’s 2.01%. The two have healthy payout ratios of less than 35%.

Therefore, while Chevron is more expensive than Shell, I believe that its premium is worth it. Chevron has a forward PE ratio of 9.1x compared to Shell’s 5.23x. Therefore, while it is not clear whether energy stocks will rise in 2023, I believe that Chevron is a safer buy than Shell and other European energy groups.


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