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BP Is Yielding 8%, I Am Buying

Mar. 01, 2020 10:17 PM ETBP p.l.c. (BP)102 Comments
AllStarTrader profile picture


  • The recent market turmoil has created an opportunity for enterprising investors.
  • I started and added to a position in BP and will continue to do so should it fall further.
  • With an 8% yield, minimal capital returns are needed to secure a double digit annual return.
  • The dividend is covered and the stock should recover when Coronavirus fears are at ease.


Oil and gas producer BP (NYSE:BP) has seen its shares sell off quite dramatically recently. Due to market fears of the Coronavirus shutting down the world economy oil prices have followed. While energy demand could weaken, homes will still need to be heated, production of goods will still be warranted, and travel will still occur. For it is in the darkest of time when we have the most fear that opportunity often is the most abound. I have initiated a position in BP now that the yield has risen to levels not seen since the financial crisis. Additionally, the company just raised its dividend and trades at the lowest valuation levels in years. For enterprising investors, now may be the time to add some to your portfolio.


BP recently reported earnings that show the company is doing okay.

Source: Seeking Alpha

While revenue declined due to price commodity weakness, profit also saw a hit. The company generated replacement cost profit of $2.56 billion down from $3.47 billion. When adjusting for one time expenses, profit was actually recorded as $19 million. Not the greatest, but not to be expected again as it was due to one-off adjustments.

For the full year the company reported $4.026 billion in profit, which was essentially cut in half from the year earlier period.

Source: Earnings Presentation

While profit being down in half would usually cause concern for investors, the more important item to watch is cash flow. For the full year the company still reported rather strong cash flow of $28.2 billion. This allowed the company to pay larger dividends and repurchase shares. The company actually repurchased 235 million shares in the year for $1.5 billion. This reduced the number of shares outstanding by enough to actually offset the dilution from its scrip plan since the third quarter of 2017.

ChartData by YCharts

This article was written by

AllStarTrader profile picture
Started investing at 11 years old. Self taught, taking an analytical all around thought process approach to investing. Look at everything from all angles and every view and you will never miss anything. I believe in collecting dividends from most of my investments, just as an investment in a private company would return profits, so should my stocks. I prefer to invest based on fundamental values, but will consider the story of the company itself when necessary.

Analyst’s Disclosure: I am/we are long BP, CVX, RDS.B. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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