Buy-to-let property can be a great way to invest in your future, but it can also involve a lot of work. Personally, I would rather invest my money in blue-chip income champion BP (LSE: BP).
Today, I’m going to explain why I believe this oil major is such a great investment for your retirement portfolio and why it has the potential to give you an income for the rest of your life.
BP is one of the world’s largest oil groups. As a result, the company is ingrained into the world economy. Its size also means it’s well prepared to deal with any unforeseen shocks, whether they are self-inflicted or not.
Two great examples are the 2010 Gulf of Mexico disaster and the 2014 oil price crash. Even though BP is still paying the victims of the 2010 disaster, it has absorbed the $65bn of costs inflicted without having to tap shareholders for additional funds.
The next big threat the firm is having to deal with his climate change. As we move away from a world powered by oil and fossil fuels, big oil companies like BP are going to have to change with the times, or risk becoming irrelevant. The company itself believes renewable energy will be the world’s primary power source by 2040.
Changing with the times
BP is changing, slowly but surely. Last month, the company announced it was selling its oil operations in Alaska £4.5bn as it moves away from conventional oil and gas drilling.
In 2017, the business acquired a 43% stake in renewables firm Lightsource, which has since gone on to become one of Europe’s leading solar developers and is expanding around the world. BP has also launched a $100m fund for emissions-reduction projects within its operations as well as targeting zero net growth in operational emissions by 2025.
Other initiatives, such as the lower carbon jet fuel called BP Biojet, which is created using recycled cooking oil, are also helping to burnish the company’s green credentials. BP still has a long way to go on this front, but it’s making progress.
I think BP has what it takes to weather the climate change threat, which is probably the most significant risk it has ever faced. More importantly for shareholders, the company can afford to invest in its operations without having to curtail dividends. Last year BP reported a free cash flow of $6bn before dividends, more than enough to cover its $0.40 per share annual payout. Capital spending for the year totalled $17bn.
At the time of writing, shares in the company support a dividend yield of 6.6% and trade at a forward P/E of just 11.6. A dividend yield of 6.6% from such a globally important business that has the financial and reputational firepower to withstand even the most severe disasters is, in my opinion, too good to pass up.
With this being the case, I reckon it’s worth snapping up this income champion today while the rest of the market is looking the other way.
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Rupert Hargreaves owns no share mentioned. 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.