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Eyes Down For BP plc’s Results

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Tuesday 4 February will be a big day for BP (LSE: BP) (NYSE: BP.US) shareholders.

It’s the day the oil & gas giant will release full-year results for December 2013, and analysts are forecasting a healthy return to earnings-per-share (EPS) growth — not to mention an attractive dividend.

Bullishness

There’s been a bit of bullishness creeping back into the markets over the past few months, and although BP shares are flat over 12 months, they’ve put on 10% since the beginning of October to reach the current level of 476p.

BP’s earnings per share (EPS) have been erratic in the wake of the Gulf of Mexico disaster, but for the year ending December 2012 we saw a steady-looking 61c. And after dividends were slashed immediately post-disaster, they’ve been picking up again and yielded a better-than-average 4.8% last year.

Against that backdrop, the current consensus suggests EPS of about 45.5p (74c) for 2013. That would represent a rise of about 24% on 2012 and would put the shares on a P/E of 10.5 — below the long-term FTSE average of around 14, and seriously behind its multiple of 17.8 for the trailing 12 months.

That would come from a predicted rise in pre-tax profit of 33% to $24.9bn (£15bn), so what evidence do we have to back up such optimism?

Great exploration year

In 18 December, BP released its Q4 exploration highlights, telling us that 2013 “had been its most successful year for new field exploration for almost a decade“. The firm has been part of seven potential new commercial discoveries from 15 wildcat exploration wells, which is an enviable success rate of 47%.

And that sounds like pretty good news after BP was forced to dispose of a chunk of its assets to meet a Deepwater Horizon bill of more than $40bn.

BP also delivered an upbeat Q3 update in October, telling us that underlying replacement cost profit was up 37% from the second quarter, to $3.7bn, and that the company is on track to meet the cashflow targets for 2014 that it set in 2011.

On the dividend front, the City is predicting a full-year payment of 22.6p per share, and with BP making its payments quarterly, shareholders have already received 17.4p per share after the Q3 payment was hiked by 5.6%. As BP’s policy is to review its dividend payments with the first and third quarter of each year, the final installment seems safe.

So it seems likely that next week’s results will confirm an annual dividend yield of at least 4.6% based on the current share price.

Cheap now?

With earnings looking set to rise nicely over the next two years to force BP’s P/E multiple down to 8.8 by 2105, and with dividend yields predicted to rise to 5.3% over the same timescale, are the shares cheap?

I have BP in the Fool’s Beginners’ Portfolio, and I think they’re still a bargain — and BP has been hoovering up its own shares all year as part of an $8bn repurchase programme, so the company seems to think so as well.

Finally, the BP dividend is looking good, but there are plenty of others too which can provide good income for years to come. If you want to learn how to identify them for yourself, have a look at the new Motley Fool report "How To Create Dividends For Life", which gives you 5 Golden Rules for Building a Dividend Portfolio.

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> Alan doesn't own any shares in BP.

See all articles by Alan Oscroft