The Motley Fool

Does the BP share price make it the best buy in the FTSE 100?

Image source: Getty Images.

What can you say about BP (LSE: BP)? This time last year, I’d have rated the BP share price as one of the most dependable in the FTSE 100. I know oil is politically out of favour, but I’ve always expected it to be with us for many decades yet. And the big oil companies will surely be heading moves away from fossil fuels anyway.

Twelve months ago, BP shares were down over the previous year. From the highs of September 2018, the price had lost close to 15%. It was essentially following a weakening in the oil price. But we’d previously had a bull run, and BP was paying very attractive dividends. That’s all changed now.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

BP share price crash

So far in 2020, the BP share price has lost more than half its value. And since those record 2018 levels, it’s down 65%. Today, BP shares have reached their lowest for the entire two decades of the current century. The price was even higher during the oil price crisis, when oil dropped to $25 per barrel. If someone had told you a year ago that this would happen, you’d have laughed at them, right?

The oil price collapsed briefly in the 2020 stock market crash. But it’s recovered since then, and now trades at over $40. On that measure, the BP share price surely deserves to be significantly above its oil crisis levels. Well, the old BP, maybe.

Dividend shock

But we’ve experienced one truly momentous event in 2020, which chilled investors to the bone. BP cut its dividend. Even throughout the earlier oil slump, its CEO at the time, Bob Dudley, calmly assured us the dividend was safe. He appeared totally confident, and that confidence was contagious.

Mr Dudley has retired now, replaced by Bernard Looney. And BP has slashed its dividend in half.

That news came with first-half results in August, the same day the company announced its “New Strategy To Deliver Net Zero Ambition.” The BP share price wavered for a few days, and then dropped like a brick.

The core of the new plan is to aim for a tenfold increase in low-carbon investment by 2030, with a rise of up to eightfold by 2025. And it includes all kinds of reductions: hydrocarbon production down 40% by 2030, emissions from operations down 30%-35%, upstream emissions down 35%-40%, no exploration in new countries… and more.

Buy, sell, or what?

I reckon BP was rather canny in the timing of all of this. I think it would have been a harder sell to institutional investors had it come at a time of medical and economic health. But what should we do now?

BP hasn’t forgotten its investors, at least not according to the new strategy. It intends the rebased dividend to be resilient. And at today’s BP share price, the yield is up around 8%. The company also says it will return at least 60% of surplus cash through buybacks, and aims at “7-9% annual growth in EBIDA per share to 2025.”

Is the new BP a good investment now? With the shares on a P/E of 11 based on 2021 forecasts, and that high rebased dividend yield, I think it could be one of the best buys on the FTSE. Investors might need nerves of steel, though.

A Top Share with Enormous Growth Potential

Savvy investors like you won’t want to miss out on this timely opportunity…

Here’s your chance to discover exactly what has got our Motley Fool UK analyst all fired up about this ‘pure-play’ online business (yes, despite the pandemic!).

Not only does this company enjoy a dominant market-leading position…

But its capital-light, highly scalable business model has previously helped it deliver consistently high sales, astounding near-70% margins, and rising shareholder returns … in fact, in 2019 it returned a whopping £150m+ to shareholders in dividends and buybacks!

And here’s the really exciting part…

While COVID-19 may have thrown the company a curveball, management have acted swiftly to ensure this business is as well placed as it can be to ride out the current period of uncertainty… in fact, our analyst believes it should come roaring back to life, just as soon as normal economic activity resumes.

That’s why we think now could be the perfect time for you to start building your own stake in this exceptional business – especially given the shares look to be trading on a fairly undemanding valuation for the year to March 2021.

Click here to claim your copy of this special report now — and we’ll tell you the name of this Top Growth Share… free of charge!

Alan Oscroft has no position in any of the shares 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.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.