BP (LSE: BP) (NYSE: BP.US) is one of the largest companies in the FTSE 100 and many private investors have differing opinions on the oil group and its prospects.
So here’s a quick rundown of the key reasons why you may wish to buy, sell or simply hold on to the company’s stock.
Demand for oil is high. It has been so for a long time, and will continue to be high until the reserves start to dry out. That’s probably a good reason to buy right there already, but BP seems to be a front-runner in alternative fuels, too.
In fact, BP has invested nearly $6.6bn in alternative energy since 2005, and is also the largest investor in bio-fuels in Brazil. Proof indeed that BP is looking far and beyond its core oil resource.
Regrettably, forward thinking isn’t always the key indicator of a successful future. You still have to take into account events that have happened in the past, and unfortunately, BP has still to find out exactly how much financial damage has been inflicted by the Gulf oil spill back in 2010.
The total compensation figure could possibly exceed $42.4bn, and BP is currently in a legal battle with the US over exactly how much should be claimed.
While all this rumbles on, the share price has stayed rather volatile, jumping from 416p to 483p throughout the year. It now sits at a ‘happy medium’ of 441p — almost exactly where it was this time last year.
While it’s not inconceivable that BP could win its courtroom battle — a move that would surely see another jump in the share price — weighing up how much damage a courtroom loss would do to the share price could convince investors to sell now, and potentially avoid a large future loss.
That said, there are reasons to stick around and wait out the court result. And for me, the best reason comes in the form of the excellent dividend.
During the third quarter of last year, BP raised its dividend by 12.5% in order to reward very patient shareholders. As it stands now, these shareholders get a very respectable quarterly payment of 9 US cents a share.
It’s also worth noting that in the past three sets of quarterly results, BP’s profits have beaten the predictions of analysts. This potentially suggests that Gulf spill compensation aside, there’s still a lot to be said for BP’s seemingly solid financials.
If you already own BP shares and are looking for an additional company that is a great dividend play, then this exclusive wealth report is a must-read. Inside, we reveal the Motley Fool’s top income share for 2013 and beyond!
Just click here for this special report now — it’s free for a limited time only.
> Chris does not own any share mentioned in this article.
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...
It’s just ONE innovation from a little-known US company that has quietly spent years preparing for this exact moment…
But you need to get in before the crowd catches onto this ‘sleeping giant’.