BP has slashed its dividend for the first time in more than a decade, after Shell dropped its dividend for the first time since World War II and Britain’s banks froze payouts. Dividend watchers now predict that by 2020, the entire amount paid out by British companies would have dropped by two-fifths.
Is BP dividend sustainable?
Dividends are typically paid from a company’s profits, so if it gives out more than it earns, the dividend is more likely to be decreased. BP’s payout ratio is very low, at just 49 percent of profit. Yet, because cash flows are more significant than earnings in determining a dividend, we must determine whether the corporation generated enough cash to cover its distribution. It paid out 53 percent of its free cash flow in dividends last year, which is about average for most corporations.
It’s encouraging to note that BP’s dividend is covered by both profits and cash flow, as this indicates that the dividend is sustainable, and a lower payout ratio indicates a higher margin of safety before the dividend is slashed.
Have Earnings And Dividends Been Growing?
Dividend companies become far more difficult to analyze and own responsibly as earnings decline. If the business suffers a downturn and the dividend is cut, the company’s value could plummet. Over the preceding five years, BP’s earnings per share have plummeted by almost 28% per year. When earnings per share drop, so does the maximum amount of dividends that can be paid.
Many investors may evaluate a company’s dividend performance over time by looking at how much the dividend payments have changed. Over the last ten years, BP’s dividend has fallen by 2.8 percent per year on average, which isn’t ideal. While the fact that earnings and dividends per share have declined in recent years isn’t ideal, we’re encouraged by management’s decision to reduce the dividend rather than risk over-committing the company in a reckless attempt to preserve shareholder yields.
Final Takeaway
Is it worthwhile to invest in BP because of its dividend? Although it pays out less than half of its income and more than half of its cash flow as dividends, its earnings per share has been steadily dropping. Although neither payout ratio appears to be an immediate source of concern, we are concerned about earnings. In conclusion, it’s difficult to get enthused about BP’s dividend.
If you want to learn more about BP, you should be aware of the hazards it confronts. For example, we’ve discovered four red flags for BP (1 of which makes us a little uneasy!) that you should be aware of before investing in the stock.
If you’re looking for dividend stocks, check out our list of the best dividend stocks with a yield of more than 2% and a forthcoming dividend.
Open an account with Interactive Brokers, the lowest-cost* platform trusted by experts, if you want to trade BP. Clients from over 200 countries and territories use a single integrated account to trade stocks, options, futures, currencies, bonds, and funds all across the world.
Is BP a buy or sell?
According to Wallet Investor’s algorithmic predictions released on November 4th, the BP stock may be a bad investment in 2022, with the stock likely sliding 21% to £2.74 over the next 12 months.
Longer term, the algorithm-based forecasting service is also gloomy. By January 2025, the price will have dropped to 0.89, and by the end of December 2025, it will have dropped to £0.05.
According to data given by MarketBeat, Wall Street analysts’ consensus one-year BP stock price objective is £3.89, which represents a 9% premium over today’s price. This is based on nine analysts’ recommendations, with price forecasts ranging from £5.30 to £2.70.
Based on the opinions of nine analysts, the consensus rating is ‘hold.’ Five of them said it was a ‘hold,’ while four said it was a ‘buy.’
This is a significant drop from a year ago, when 20 analysts expressed their thoughts, with 13 recommending ‘buy,’ four recommending’sell,’ and three recommending ‘hold.’
Only Morgan Stanley increased their BP share price projection from £3.42 to £3.88 in the last year, representing a 7.69 percent increase at the time. Berenberg Bank also upgraded the company to a ‘Buy’ rating and raised the price objective to £4.25.
On the pessimistic side, HSBC reduced the stock’s price target from £3.65 to £3.60, downgrading it to ‘hold.’
It’s important to remember that analyst projections can be erroneous. Forecasts should never be utilized in place of your own study. Before you invest, make sure you do your homework. Also, never trade or invest money you can’t afford to lose.
Is BP paying dividend in 2021?
On August 12, 2021, P p.l.c. (BP) will begin trading ex-dividend. On September 24, 2021, the company will issue a cash dividend of $0.323 per share. The cash dividend is payable to shareholders who purchased BP before the ex-dividend date. This is an increase of 4.19 percent over the previous dividend payout. The dividend yield is 4.99 percent at the current stock price of $25.88.
When did BP stop paying dividends?
Holders of ADS In line with bp’s aim of promoting efficient and modern methods of communication with its shareholders, bp will no longer pay dividends via check beginning in December 2020. Payouts can be received via direct deposit or by participating in dividend reinvestment to obtain future dividends.
What is wrong with BP?
In the nations where it works, BP has regularly created environmental disasters and been implicated in human rights violations. Consider the following scenario:
- In 2010, BP’s offshore oil rig Deepwater Horizon exploded, killing 11 workers and spilling 4.9 million barrels of oil into the Gulf of Mexico. BP has been fined $55 billion as a result of the accident, including a $20.8 billion charge to the US government, the highest environmental fine in US history.
- BP spilled 95 tonnes of oil into the North Sea in 2016 and refused to clean it up. To make matters worse, BP no longer pays net taxes on North Sea oil extraction. Instead, the British people are footing the bill for BP’s drilling and spilling.
- In Azerbaijan, Algeria, Libya, Indonesia, and other nations, BP has backed and traded with regimes accused of grave human rights violations.
- It was complicit in allowing a Colombian paramilitary brigade to create a pipeline as a major shareholder in the pipeline company Ocensa “More than 12,000 people have been tortured, murdered, or disappeared along the route of the Ocensa pipeline, as well as in the oil-rich and politically unstable Casanere region of Columbia.
- In Alberta, Canada, BP has invested at least £1.6 billion in tar sands exploitation. This has devastated large swaths of the Canadian countryside, including holy Beaver Lake Cree territory, which is now suing BP.
- BP’s business model is unsustainable in and of itself. We know that humanity can only burn 33% of existing oil supplies without raising global temperatures by more than 2 degrees Celsius. This is widely agreed to be the maximum temperature rise that can be tolerated in order to limit the worst effects of climate change hunger, mortality, displacement, and war to a minimum “acceptable” is the absolute minimum. BP, on the other hand, plans to increase its oil extraction operations, creating devastating climate change, while campaigning against environmental laws and clean energy alternatives.
What’s wrong with BP sponsoring the arts?
- BP invests in the arts to generate positive PR, which it sorely needs. While continuing to ruin the environment and contribute to human rights violations around the world, being viewed as a partner to our national cultural institutions helps BP promote itself as a kind, generous member of the community. This is referred to as ‘artwash.’ It also works. People who were exposed to BP’s Olympic sponsorship believe the company is working harder to make the world a better place.
- By giving positive attention to BP’s conduct, the arts and cultural institutions who accept funding are effectively legitimizing BP’s actions.
- The reputation of the arts and cultural institutions that accept oil sponsorship is tainted. Big oil companies should not be allowed to exploit art.
- In exchange, the arts institutions receive only a small portion of BP’s annual revenue. The British Museum and the Royal Opera House receive less than 1% of their yearly income from BP sponsorship, while the National Portrait Gallery receives only 2.9 percent. These institutions require BP far more than BP requires them.
- Many artists, arts professionals, and members of the general public have spoken out against BP’s sponsorship of the Portrait Award:
- On pages 23-27 of Picture This A Portrait of 25 Years of BP Sponsorship, Raoul Martinez, an artist who has been short-listed for the BP Portrait Awards three times, has written a serious and passionate piece on this.
- In response to BP’s sponsorship of the award, 205 artists and cultural enthusiasts wrote an open letter to the National Portrait Gallery.
What are the alternatives?
- We believe that enhanced government financing for the arts should replace oil sponsorship. See the PCS Union’s extensive Alternative View for Culture for one vision of how the arts should be funded without corporate funding. We’ll join forces with the Show Culture Some Love campaign to advocate for more public funding for the arts and culture.
- If the main cultural institutions do not renew their sponsorship arrangements with BP, multiple, more ethical and sustainable businesses may pitch for a collective sponsorship contract.
- A notable example of an alternative is the Scottish Portrait Awards, which are sponsored by the Scottish Arts Club charity trust. While the prize money is far less than the BP Portrait Award, it is possible that it will grow as these new awards flourish.
- The Fossil Funds Free pledge has already been signed by hundreds of individual artists and arts organizations. “In the face of public funding cuts, it is especially vital for artists and cultural organizations to decide independently and openly: what funds are we willing to accept?” they acknowledge. And what should we say no to? What do we want our money to accomplish in the world?”
- Universities, churches, local governments, and pension funds are all beginning to dissolve their financial ties with fossil fuels as part of the divestment movement.
- Now, our cultural institutions are following suit: the UK’s Science Museum dismissed Shell as a sponsor in 2015, while Tate and the Edinburgh International Festival cut BP in 2016. This didn’t stop the Festival from putting on a terrific and diverse lineup of world-class performing art in August 2016.
Is BP good stock?
While transitioning to a top renewable energy provider, BP is focused on maintaining its strong financial performance. The two-pronged approach has given BP the luxury of being picky about whatever renewable energy investments it makes. The goal appears to be to make long-term, high-quality decisions that are backed up by BP’s good short- to medium-term performance in the oil market. Investors should not anticipate a complete turnaround overnight, but rather a clear strategy accompanied by strategic divestitures and investments.
The company has achieved some significant milestones, with its renewable energy production pipeline reaching a planned 21GW/day, including offshore wind, which is already producing at an amazing 3.7GW/day. BP also reached 10,000 electric vehicle charging points, which is a significant milestone. The shift to renewable energy is part of a larger push to achieve carbon neutrality by 2050. The broad consensus on renewable energy investments is that they will pay off in the long run as the world’s reliance on fossil fuels declines. Although oil will continue to be the primary source of energy for the foreseeable future, the corporation is doing an excellent job of managing both areas.
The Takeaway
For long-term energy investors, BP is an excellent choice. It’s going through a transformation right now, but its fundamental business isn’t broken, and it pays a hefty 4.4 percent dividend and does a fantastic job with buybacks. With a price-to-sales ratio of 0.7 and a price-to-earnings ratio of 11.58, the company remains inexpensive. In addition, the corporation has completed its fifth quarter of debt reductions. Renewable investments provide BP stockholders with something they didn’t have before: variety. BP is currently in a strong position, and a hard winter might push oil prices further higher. BP is a safe place for investors to store their money for the long term.
Should you hold BP stock?
Wall Street research analysts agree that BP stock should be “held” by investors. A hold rating means that experts believe investors should keep their existing positions in BP but not add to or sell their existing positions.
What do the terms ‘ex-dividend’ and ‘record date’ mean?
We establish a date for our shares to be sold without dividend entitlement before declaring each payout, in consultation with the London Stock Exchange. Going ‘ex-dividend’ is the term for this. They are referred to as ‘cum dividend’ prior to that date.
If you purchase shares before the ex-dividend date, you will be eligible for the newly announced dividend. That dividend is due to the prior owner if you buy on or after that date during the ex-dividend period.
The dividend is paid to shareholders depending on the number of shares registered on the share register as of the deadline (the “record date”). For both ADS holders and ordinary shareholders, the record date is the day after the ex-dividend date. If you receive a dividend after selling your stock and are unsure if you are entitled to it, contact the broker who handled the transaction on your behalf. The dividend may be due to the new owner, depending on the circumstances of the transaction.
How often will I receive a dividend?
bp anticipates declaring dividends four times per year. The bp directors decide on the level of quarterly dividends to be paid to shareholders when the operating results for each quarter are disclosed. Dividends will be paid in US dollars to ADS holders. Dividend amounts and dates are subject to change at any moment without notice. Dividends to preference shareholders will be paid twice a year.
Our financial calendar contains information on forthcoming dividend payment dates.
Our dividends summary contains information about the current dividend distribution schedule.
Can I choose how to receive my dividend payment?
Ordinary shareholders and ADS holders have the option of receiving cash dividends or reinvesting their dividends in bp shares. Cash dividends are paid to preference stockholders. See this page for more information on payment methods.
Is NLY a safe investment?
In the short term, Annaly Capital Management appears to be a safe and low-risk investment, but profits, book value, and dividends may be lower than they are now in 5 or 10 years. As a result, NLY isn’t unduly risky, but it’s also not a very safe buy-and-hold investment, as the company’s history has demonstrated.
