The BP (LSE: BP.) share price hasn’t set the world alight over the last 12 months, rising just 2.25%. Yet after climbing 24% in the last six months, it’s starting to look more like the recovery story is on. As someone who bought the stock last autumn, I’m hoping the momentum continues. So what can we expect?
FTSE 100 energy stock
BP has had a bumpy millennium. Fifteen years ago, its shares traded close to 650p, before the Deepwater Horizon disaster in April 2010 triggered $65bn of fines, compensation, and clean-up costs. Since then, the FTSE 100 stalwart has seen plenty of peaks and troughs as oil prices rise and fall. Today, the stock trades at around 435p, still down a third from its former highs.
BP’s dividend story has been a bit up and down too. Payouts were frozen at 40 US cents per share in 2016 and 2017, then slashed twice during the pandemic, before being restored at a lower level. They totalled 31.27 cents in 2024.
Things look to be back on a more even keel, with the latest quarterly dividend lifted 4% to 8.32 cents. The forecast yield for 2025 is 5.66%.
That’s easily ahead of the FTSE 100 average of around 3.25%, and the company continues to support those payouts with share buybacks. The latest quarterly buyback was $750m.
Energy profits are cyclical, and the oil market can be unpredictable. Yesterday, I was reading about a possible supply glut. Today, Oilprice.com warns that “OPEC+ spare capacity is shrinking fast”. Investors could spend their lives second guessing oil price movements, and still not have a clue what’s going on. The bumpy global transition to renewables adds another layer of uncertainty.
Long-term potential
BP now trades on a fair value forward price-to-earnings ratio of 14.5. Profits have dipped lately, but that’s mostly due to strong comparatives, when oil was priced higher. The board has committed to fossil fuels, and backed this up with its biggest oil discovery in decades, off Brazil’s coast, which could help offset declining fields elsewhere.
So what do the experts make of it? The one-year consensus median share price forecast stands at 477.1p. That would mark a gain of 9.6% from today’s 435.3p. Combine that with a forward yield of 5.66%, and the total return could hit 15.26% over the next 12 months if things play out as expected.
That would turn a £10,000 investment into £11,526, which isn’t bad. I’d be happy with that, but I’d also say that from here, the BP share price could pretty much go anywhere.
Of 31 analysts covering BP, 13 rate it a Strong Buy or Buy, 17 call it a Hold, and just one says Sell. It’s not exactly a raging bull market vote, but it’s enough to make me stay invested.
Like many, I’d prefer a faster transition to clean energy, but the world still needs oil and gas. Until alternatives can fully replace them, BP will stay relevant.
I’m not expecting fireworks from my BP shares in the next 12 months, but with a strong yield and steady buybacks, I think investors might well consider buying. I’m happy to hold my stake, reinvest the dividends, and see where the next year takes us.
