BP (LSE: BP) shares have fallen out of favour, slumping 25% in the last year to just 367p.
The FTSE 100 oil and gas giant has been swamped by a sea of troubles, everything from falling oil prices to its baffled response to the net zero transition. Yet long-term investors shouldn’t be too downbeat. There have been moments of share price excitement, and plenty of dividends.
Shareholder payouts roll in
Five years ago, on 18 May 2020, someone investing £10,000 in BP would have picked up 3,225 shares, with the stock then priced at just 310p.
Since then, BP has paid dividends totalling 92.313p per share, which would have given our investor total income of £2,977. That’s more than that just a nice bonus. It’s a core part of the stock’s appeal.
On top of that, the share price has climbed around 18.5% over the same five-yer period. That takes the total value of the stake to £14,628, a total return of roughly 46%.
That’s not bad at all, especially given the bumps along the way. It’s a solid reminder of the benefit of buying shares when they’re down and collecting dividends while waiting for the recovery.
Long-term focus returns cash
On 29 April Q1 results showed underlying replacement cost profit of $1.38bn. That was below analyst expectations but still an improvement on the $1.17bn posted in Q4 2024.
Net debt crept higher though, rising from $24.02bn to $26.97bn over the year. BP responded by scaling back its generous $1.75bn quarterly share buyback to $750m.
Yet it’s sticking with dividends, and the yield is starting to look chunky again, after the 2020 rebasing. It’s now 6.6% on a trailing basis and forecast to reach 6.9% next year.
The downside is that this is mostly due to the falling share price.
CEO Murray Auchincloss is shifting back to fossil fuels after the group’s awkward renewables flirtation. That’s probably sensible for now but does leave the company exposed if there’s a big clean energy breakthrough that hammers the case for fossil fuels.
Plenty of risks remain
Donald Trump’s tariffs may have eased, but geopolitical tension remain high, and we can’t rule out more trade trouble and even a recession.
Trump is also in talks with Iran over its nuclear programme, and any deal here could unlock oil flows, boosting supply and lowering the price.
I bought BP shares on dips both in September last year and again this January. So far, I’ve done poorly, down around 10% despite bagging a couple of dividends. I’m in this for the long haul and let my reinvested shareholder payouts do their bit even if the BP share price doesn’t.
The 27 analysts serving up one-year BP share price forecasts produce a median target of just over 435p. If correct, that’s a pretty decent increase of more than 18% from today. Combined with that yield, this would give investors a total return of almost 25% if true.
Forecasts are a bit meaningless, but I’d be more than happy with that.
I’m afraid I can’t get too excited about BP shares. All I’m doing is holding on, and hoping this cyclical sector swings back. Right now, I can’t see it but while I wait, I’ve got those dividends. Fingers crossed they hold.
