With the oil price rising, the BP share price is gushing again

Though the BP share price has surged since January, this FTSE 100 stock has lost value over one and five years. But I’ve no interest in selling my stake.

| More on:
White female supervisor working at an oil rig

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

A quick recap of how stock markets are doing in 2024. The US S&P 500 index has leapt 9.4% since 29 December, while the tech-heavy Nasdaq Composite is close behind with an 8.6% gain. Meanwhile, the UK’s FTSE 100 has moved up just 2.7%. But the BP (LSE: BP) share price has easily beaten its parent index.

BP bounces back

At its 52-week high, BP stock briefly hit 562.3p on 18 October 2023. It then fell steadily until bottoming out at 441.05p on 22 January. At this point, it had lost 5.4% since the turn of the year.

As I write, the BP share price stands at 511.3p, valuing this oil & gas supermajor at £86.3bn. This makes the group the fifth-largest Footsie firm. What’s more, the shares have rebounded 15.9% from their January low.

Here’s how this widely held stock has performed over six timescales:

Five days+1.4%
One month+8.2%
Six months-1.8%
YTD 2024+9.6%
One year-4.9%
Five years-10.5%

My table show BP’s recent price momentum, with its stock rising over five days, one month, and in 2024 so far. I suspect this trend is down to the rising oil price, with the cost of a barrel of Brent crude leaping by 19% this calendar year.

Then again, over one year and five years, this well-known British business has delivered negative returns to its shareholders. Oops.

What about dividends?

It’s important to note that the above figures exclude dividends, which are very generous from some FTSE 100 firms. The Footsie itself offers a cash yield of 4% a year — far ahead of rival stock indexes.

As for BP, its shares offer a dividend yield of 4.4% a year, but its cash payouts have risen for the past two years. The total dividend has climbed from $0.22 for 2021 to $0.24 for 2022 to $0.28 for 2023. That’s a welcome rise of 27.3% in 24 months.

What’s more, while future dividend distributions are not guaranteed, they look well-covered to me. BP shares trade on a multiple of 7.4 times earnings, delivering an earnings yield of 13.5%. This means that the trailing dividend yield is covered almost 3.1 times — to my mind, a solid margin of safety.

Energy stocks can be volatile

That said, history has taught me that energy and commodity stocks can be wildly volatile, with the BP share price no exception. Also, energy prices themselves gyrate in ways that are fiendishly difficult to predict.

For the record, my wife and I own BP stock as part of our diversified, balanced family portfolio. We bought in mid-August 2023, paying 484.1p a share for our stake. To date, we are sitting on a modest paper gain of 5.6%, excluding dividends received.

Of course, to reduce global CO2 emissions, the world needs to move away from burning fossil fuels. Hence, BP faces a difficult transition to a low-carbon, renewable-energy future. But this will take many decades, so we will hold tightly onto our BP stock for now!

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Cliff D’Arcy has an economic interest in BP shares. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services, such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Group of young friends toasting each other with beers in a pub
Investing Articles

Taylor Wimpey just paid me £158.78. I’m aiming to turn that into a £100k yearly second income

Harvey Jones says small, regular dividend payments can turn a few pounds into a mighty second income, if he gives…

Read more »

A pastel colored growing graph with rising rocket.
Value Shares

These FTSE 250 shares are tipped to rise 14% to 18% in the next year!

Looking for the best FTSE 250 momentum shares to buy? Here are two that City analysts expect to soar in…

Read more »

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

Lloyds’ share price is up 20% in 3 months! How high can it go?

Lloyds’ share price has ripped higher recently. Here, Edward Sheldon provides his view on the level it could potentially climb…

Read more »

Investing Articles

Why the Rolls-Royce share price could continue to outperform

The Rolls-Royce share price keeps moving forward, but this Fool thinks it's still behind where it ought to be after…

Read more »

Fireworks display in the shape of willow at Newcastle, Co. Down , Northern Ireland at Halloween.
Investing Articles

The City expects explosive growth in earnings from this almost-penny stock

It’s rare to find earnings predictions as robust as those for this not-quite-a-penny stock, so I’d research and consider it…

Read more »

Investing Articles

As earnings rise 600%, is Nvidia still the best AI stock to buy?

With the supply and demand equation still looking strong for Nvidia, is the stock still the best AI opportunity for…

Read more »

Value Shares

Cheap UK stocks are soaring! Here’s 1 to consider buying now

In recent weeks, many UK stocks have surged. Here, Edward Sheldon highlights a blue-chip FTSE 100 share he believes could…

Read more »

Investing Articles

Top alternatives to consider as the IAG share price climbs!

I've been bullish on IAG shares for some time, but as the IAG share price pushes upwards from its pandemic…

Read more »