HomeStock MarketBP stock price: the cheapest FTSE 100 index?

BP stock price: the cheapest FTSE 100 index?

The “net zero” thing disappointed me BP (London Stock Exchange: BP) As has been done to many investors. I mean, who wants to invest in obsolete things? So, since the low in November last year, BP’s stock price has risen 65%. Those who are going upstream have done a good job.

However, the dividend will certainly not return to the old level anytime soon. We can no longer rely on the unrestricted pursuit of the huge profits from the ever-increasing amount of oil. But then, the stock price was also reset. When a company undergoes fundamental changes, it is of course time to adopt a new perspective.

In fact, 2020 is a year of major changes. When BP released its full-year results in February 2021, CEO Bernard Looney described it as “A pivotal year for the company. “

Dividends are the key

Re-checking BP with this in mind, I started to like what I saw again. In the past, I always bought BP because of its dividends, and now this has been severely cut. As BP announced a large-scale net zero in August 2020, the dividend was re-adjusted to 5.25 cents per share per quarter, which is expected to continue.

This will provide an annual dividend of 21 cents per share, which is approximately 15.4 pence at the current exchange rate. Based on the latest BP stock price, the yield is 4.9%. This is a far cry from BP’s past long-term dividends. I really don’t mind some.In fact, the payment for the second quarter of 2021 has already promote To 5.46c or 3.95p. So we have seen progressive dividends.

Oil price

At present, oil prices have strengthened again reasonably, which helped BP achieve surplus cash flow in the first half of the year. The company has begun a $1.4 billion stock repurchase.While in Q2 timeRooney said: “By 2025, with an average of around US$60 per barrel, we expect to be able to repurchase approximately US$1 billion per quarter and have the ability to increase the dividend per common share by approximately 4% per year. “

I like the idea of ​​using surplus cash for stock repurchase during periods of high oil prices. It should not pay volatile special dividends, but should help balance shareholder returns and promote the company’s long-term ordinary dividend progress. The reduction in existing stocks means that those who hold them will receive additional cash per share.

This also means that the company itself now considers BP’s stock price to be very valuable. This helps strengthen my emotions.

BP stock price risk

Now, I am covering up the risk a little bit here. But they do exist, and they are not trivial. The obvious big problem is oil prices. If it drops to around $30 again, cash flow may become a trickle. Then there is the actual path of net zero emissions. It is easy to assume that all of this has been established and will definitely be achieved. But no, we are far from that level of confidence.

In general, I do think that I am again looking for a company that can provide me with a stable and growing source of income in the next few years. BP’s stock price is very attractive to me.

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Alan Oscroft There is no position in any of the above-mentioned shares. The Motley Fool UK has no position in any of the aforementioned stocks. The views expressed by the companies mentioned in this article are those of the author and may therefore differ from the official recommendations we made in subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that taking into account a variety of different insights, We are better investors.

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