Buy This, Not That: Berkshire’s Secret Oil Play Pays Triple the Dividends

Shah Gilani|May 7, 2025

When America’s most famous investor owns significant positions in two competing companies…

Which one should you choose?

Today, we’re diving into Buffett’s billion-dollar oil bets – and why one clearly outshines the other.

I’ve analyzed both stocks from every angle – balance sheets, dividends, charts, and future prospects.

One offers a massive 5% dividend while the other struggles with post-acquisition debt.

Tune in for your weekly Buy This, Not That.

Click on the thumbnail below to watch it.

Transcript

Hi everyone, Shah Gilani here with your weekly BTN – “Buy This, Not That.”

Let me fix the lighting so I don’t appear too red on camera.

Today, I’m comparing two oil majors that share a common investor: Berkshire Hathaway owns significant positions in both.

Let’s examine Occidental Petroleum (OXY) first, then Chevron (CVX).

It’s Wednesday, and Occidental has earnings after today’s closing bell.

The big story with OXY has been Berkshire Hathaway’s continued investment. While Warren Buffett has been a net seller overall, he’s been consistently adding to his Occidental position since 2020.

The relationship began during Occidental’s battle with Chevron for Anadarko Petroleum.

Lacking Chevron’s financial strength, OXY appeared to be the underdog until Buffett stepped in with $10 billion in capital through a preferred stock deal paying an 8% dividend – a characteristically profitable arrangement for Berkshire.

With Berkshire’s backing, OXY won Anadarko, but the timing proved unfortunate.

Shortly after closing, COVID hit, oil prices crashed, and the acquisition’s value diminished significantly.

In 2022, Berkshire began purchasing common OXY stock at approximately $46 per share. When Russia invaded Ukraine, oil prices surged, improving OXY’s cash flow and enabling debt reduction and share buybacks. Berkshire continued buying and now owns about 28.2% of Occidental’s $36.5 billion market cap.

However, with OXY trading at $39.27 and Berkshire’s average purchase price around $51.75, they’re currently sitting on a substantial loss. This raises questions about whether Greg Abel will maintain this position after Warren steps aside.

Occidental’s earnings report today is expected to show $0.76 per share (a 20% year-over-year increase) on revenue of $6.91 billion (15% increase). While OXY has beaten estimates 75% of the time over the past two years, they’ll need strong results to move the stock higher.

Turning to Chevron, this is actually a larger position for Berkshire, ranking among their top 7 holdings alongside Apple, Coca-Cola, and Bank of America. Despite this, Chevron receives less attention than OXY.

Looking at both charts, if you’re trying to buy at low points, both companies present opportunities.

However, Berkshire’s underwater position in OXY doesn’t guarantee they’ll hold it long-term. With approximately 6% of Berkshire’s portfolio already in Chevron, they could easily divest from OXY.

Chevron recently reported earnings of $2.18 per share, meeting expectations, though revenue came in slightly below Bloomberg’s consensus at $47.61 billion versus $48.1 billion projected.

When deciding between these stocks, I recommend Chevron for several reasons.

It’s significantly larger with a stronger balance sheet and less leverage than Occidental. Chevron’s stock has performed better over the past two years with a more stable chart pattern, while OXY’s two-year chart looks quite poor.

Both companies pay dividends: Occidental offers a 2.44% yield with a 38% payout ratio. Despite room for dividend growth, they’re prioritizing debt reduction and share buybacks. Chevron provides a more attractive 5.04% yield with a 75% payout ratio – a much better income option for oil investors.

In conclusion: Buy Chevron, not Occidental Petroleum. Chevron’s chart shows sideways rather than downward movement, offering a better entry point at current levels.

That’s all for this week!