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Here’s why I’d buy the BP share price right now

People often think that you need complex stock picking systems and deep analysis to do well in the stock market. My experience suggests that it doesn’t have to be that difficult.

For example, FTSE 100 oil and gas giant BP (LSE: BP) offers a dividend yield of 5.8% at the time of writing. Buying these shares and reinvesting the dividends for 12 years would double your money, assuming the share price was broadly stable.

I’m sure you’ll agree that’s a pretty simple set-up. You may think it’s too simple. After all, lots of things could go wrong in that time. The oil market could crash (again). Demand for oil could plummet if we all buy electric cars. Governments could impose harsh new taxes on fossil fuel producers.

Well, maybe. But the reality is that all businesses face unknown future risks. It’s a fact of life. The advantage of investing in big FTSE 100 stocks is that they usually have long histories and have survived difficult periods before. BP certainly has.

Tomorrow is always uncertain

As investors, I think we have to hope that if the basics are right today, management will keep the show on the road in the future.

In BP’s case, I suspect that demand for oil and gas is likely to remain strong. Gas is a much cleaner alternative to coal for electricity generation. And oil seems likely to remain in demand to make fuel for airplanes, ships, trains and lorries, if not for cars too.

I’ve given up trying to predict the future when I invest. If things look okay now, that’s enough for me.

BP shares currently trade on about 12.5 times earnings and offer a 5.8% dividend yield. Cash generation looks good and profits are expected to rise next year. I’d buy at this level.

A buy-and-forget stock?

Wm Morrison Supermarkets‘ (LSE: MRW) strong turnaround under chief executive David Potts has impressed me.

Under Mr Potts management, the performance of the stores has improved significantly. The company has also used its food production business to move into wholesale as a supplier to convenience store group McColl’s. This has allowed the group to expand without having to invest in new stores.

However, the grocery market remains tough and sales growth is slowing. Figures released today show like-for-like sales growth of 2.3% during the 13 weeks to 5 May. Of this, 2.1% came from wholesale, with retail sales rising by just 0.2%.

Sales growth has now slowed in each of the last four quarters. Mr Potts didn’t say much about the figures except that he plans to continue “improving the shopping trip and becoming more competitive”.

Digital disruption?

One possible opportunity for the firm is online. The terms of its deal with online delivery partner Ocado have been relaxed, in return for the supermarket giving up some capacity in one of the group’s warehouses. Morrisons is now able to work with other companies online in a way that wasn’t permitted before.

The implications of this deal aren’t clear to me. But Mr Potts’ judgement so far has been good. He’s cut debt, boosted profit margins and delivered sustainable dividend growth.

As with BP, I’d be happy to continue to trust Morrisons’ management to deliver steady shareholder returns. The stock’s forecast yield of 4.5% suggests to me that these shares could be a decent buy for income.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended McColl's Retail. 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.