BP stock gushes

At its 52-week low, BP stock hit 337.65p on 1 May 2025. This would have been an excellent time to buy into the British oil & gas supermajor, with its shares spurting higher since.

On Friday, 17 April, the BP share price closed at 541p, valuing the former British Petroleum at £91.9bn. This makes BP the ninth-largest company in the FTSE 100 index. However, the shares plunged by 43p (-7.4%) on Friday, tracking the oil price south as geopolitical tensions eased.

Despite this, BP stock is up 50.5% over one year and 85.2% over five — easily beating the Footsie over both periods. What’s more, the above figures all exclude cash dividends, which gush freely from BP’s coffers to shareholders’ bank accounts.

BP: big payouts

Disclosure: my family portfolio owns BP stock, having paid 484.1p a share for our stake in August 2023. What made us decide to buy into Britain’s second-biggest energy firm? First, we bought BP shares partly as a hedge against higher oil prices. Second, to collect a share of BP’s gushing dividends.

After this latest sudden slide in the BP share price, the stock offers a market-beating dividend yield of 4.5% a year. This is 50% higher than the 3% a year on offer from the wider FTSE 100.

Moreover, we don’t spend our quarterly BP dividends. Instead, we reinvest this passive income by buying yet more shares. This increases our shareholding, helping to raise our future returns as BP owners.

BP: bumpy periods

Then again, the past five years have sometimes seen rough rides for BP shareholders. The five-year share chart resembles the teeth of a saw, with the price rising and then falling back, only to climb steeply over the past 12 months.

To be honest, I’m not particularly happy after 32 months as BP shareholders. To date, we are sitting on a small paper profit of 11.8% of our initial investment. That’s not a great return for taking the risk of investing in a fossil fuel business. That said, patiently reinvesting our dividends for nearly three years has boosted our returns.

In summary, buying BP shares has largely done what I anticipated. It has delivered market-beating income, while providing a useful hedge against higher energy bills. Nevertheless, this stock has been much more volatile than I’d hoped, as the oil price has bounced up and down since mid-2023.

Finally, I expect energy stocks to remain highly volatile until a lasting truce emerges in the US/Israel-Iran war. If a permanent ceasefire is agreed, then oil prices — and the BP share price — could sink once again. Furthermore, BP still faces the ultimate challenge of moving away from fossil fuels to renewable energy, which will be no easy task!

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I was worried about its awkward transition away from fossil fuels (and back again), and the impact of the climate debate. But I was also drawn by the dividend, which was above 6% at the time, and the low valuation. So what does the next year hold?

Right now, it’s hard to look past the war with Iran. That’s dominating the headlines, and investor sentiment towards BP. When Donald Trump declared the crucial Strait of Hormuz open on Friday (17 April), markets soared but BP shares moved the other way along with the oil price.

Can it smash the FTSE 100 again?

In the short term, BP looks like a pure play on Middle East turmoil. Whenever the oil price climbs, its shares follow. When a resolution seems possible and oil falls, so do BP shares.

With Hormuz apparently closed again, BP has been climbing today (20 April). That could reverse at any moment. So how can investors make sensible decisions at a time like this?

I’m always wary about analyst forecasts, but I was curious to see what they would say about this stock. Currently, 28 brokers offer one-year forecasts, producing a consensus target of 604p. That’s up a modest 8% or so from today’s 559p. Add a forecast 2026 yield of 4.7%, and the total return comes to 12.7%. That would turn £10,000 into £11,270. Which is perfectly respectable, but nowhere near as exciting as the last 12 months.

Forecasts are precarious at the best of times. Some of those estimates may be gathering dust, possibly even pre-dating the Iran conflict. There’s also a wide range of outcomes, with a low estimate of 382p and a high of 777p. With the shares at around 559p today, that last one would mark an increase of 39%. It could happen. Frankly, anything could right now.

Is BP now too risky to buy?

In periods of extreme short-term volatility, it often pays to look further ahead, say, five to 10 years. With luck, the Iran conflict will be long over by then, although nothing is certain. If the planet warms, political pressure on fossil fuel producers could intensify. Renewables may also have advanced significantly. Both would pose a threat to BP.

Yet recent events underline how vital oil remains to the global economy. Even if demand for fuel declines, it will still be needed for plastics, pharmaceuticals, feedstock, and fertiliser, although not to the same extent.

With a forward price-to-earnings ratio of around nine, BP looks good value despite its strong run. But it’s not without risks. I think it’s worth considering as part of a balanced portfolio, and will hold my stake. But I can see much less bumpy income and growth opportunities on the FTSE 100 today, and I’ll be pursuing those for future purchases.

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I find it harder than usual to distinguish the best-value companies from those with less promising outlooks. A rising tide lifts all boats, they say? The trouble is, it can obscure the ones that are really destined to be sinkers.

It reminds me of that famous quote from ace investor Benjamin Graham, which puzzled me when I first saw it. He said: “In the short run, the market is a voting machine but in the long run, it is a weighing machine.“

He meant that in the short term, investors vote with their money, based on headlines, crowd trends, emotion… whatever drives their feelings on any given day. And it can take a longer time for underlying earnings prospects for companies to be weighed up and determine a sensible valuation.

Are these cheap?

As an example, are BP (LSE: BP.) shares a good investment now? I think it’s hard to tell. The BP share price is being driven by short-term oil prices. One day the stuff is up over $110 per barrel. Then the next day, Donald Trump reverses what he said the previous day, and oil is suddenly back below $100.

The political push behind oil and gas consumption of recent years also helps obscure the long-term outlook for oil. Renewable energy will surely have to come back into favour some day. And we’re already seeing the rise of a new generation of nuclear power plants emerging.

Now, I do see BP as a stock that long-term investors should seriously consider. I like its 4.5% forecast dividend yield, for one thing. But while politically-driven sentiment is clouding the outlook, my feeling for a rational valuation is obscured. A market shake-up, hopefully leading to more level-headed times, could help clarify that.

Tricky valuations

I mentioned nuclear power. And that brings me to Rolls-Royce Holdings (LSE: RR.). Its stunning recovery over the past few years took us all by storm. And those who saw it coming could easily be sitting on a five-year profit of over 1,100% today.

Again, this is another company I rate as worth consideration, even after that rise. But we’re surely looking at a defence premium in the share price here. And that’s in the midst of today’s Middle East military conflicts. On the other hand, the UK’s first nuclear plant based on Rolls-Royce small modular reactors has the go-ahead for work to begin.

But does this mean Rolls-Royce shares are worth a forecast price-to-earnings (P/E) ratio of over 35? And how will markets evaluate them when we’re in more peaceful times? Again, I really don’t know.

Calmer markets

While I do rate these two stocks as ones to consider, I think the main risk facing both is the same. It’s the current emotion-driven and headline-driven market sentiment. But I’m sure more rational times will return — even if it does need a stock market crash.

And a crash would mean cheaper shares all round anyway.

The post A stock market crash this summer? Here’s how it could help appeared first on The Motley Fool UK.

Oil prices have been soaring, and investors are banking some profits on the assumption the recovery is fragile. Maybe they’re right — those oil prices have reversed on Friday (17 April). So let’s dig deeper.

Oil prices

Over the last three months, Brent crude has climbed by around 37%. And that’s pushed BP shares up 22%. 

Whether or not that’s justified ultimately depends on the impact on the company’s earnings. So what are analysts saying?

Expectations for this year have more than doubled. And the impact is anticipated to continue into 2027 and 2028.

A discounted cash flow (DCF) analysis tells us what this means for the stock. A 9% target return implies an 80p per share increase. 

With the stock up 103p since the start of the year, some of the selling arguably makes sense. But that’s not the only thing that matters.

Intrinsic value

Analysts might be upgrading the stock. But the boosted earnings to 2029 only account for 37% of the firm’s current share price.

In terms of enterprise value (EV) – which includes debt – the impact is smaller still. BP’s EV per share is more like £8.01.

On that basis, what matters most is what happens after 2029. An extra 80p per share in present value isn’t a huge deal. 

In fact, earnings over the next few years matter less than investors might think. Even with the recent analyst upgrades.

Around 75% of the present value has to come from what happens after 2029. And that’s the thing to focus on.

Long term

By my calculations, BP needs to average around 34p in earnings per share over time to generate a 9% return. Is that realistic?

Source: Fiscal.ai

The firm hasn’t managed this in the last 10 years. There are, however, reasons to be more optimistic going forward.

Investments in wind and solar generation have weighed on earnings. On top of this, they’ve left the firm with excess debt.

BP, however, is focusing on strengthening its balance sheet. And the windfall from volatile oil prices should help with this. 

Furthermore, the new CEO is refocusing the company on oil and gas. So the same business mistakes of a few years ago are less likely to be repeated.

Time to sell?

Investors selling BP shares are clearly looking ahead. Oil prices have already started falling and that makes the stock vulnerable.

That’s a risk. But the recent volatility should give earnings a boost that impacts the firm’s intrinsic value.

My estimate of this is that it’s worth around 80p per share. On top of this, there are also lasting consequences to consider.

An improved balance sheet and a better strategic focus should help long-term profits. And these are reasons for positivity.

Investors who have owned the stock since the start of the year have done well. I’m not sure they need to think about selling yet, but I don’t see it as one to consider buying either.

The post Why are some investors rushing to sell BP shares? appeared first on The Motley Fool UK.

Aside from a potential boost from rising oil prices, what other factors may affect the stock this year?

BP in numbers

Over the past month, BP shares have climbed about 4.5% on the London market, outpacing key rival Shell. It’s a stark reminder that there’s still life in the big oil names, even amid the energy transition debate.

Financially, it’s far from fragile. Admittedly, debt is a concern at around £53.92bn, but manageable given its scale and cash flow. In its latest results it reported around £8.55bn in free cash flow, underpinned by high oil and gas production and strong refining margins.

Valuation is a bit high after the recent rally, but the shares still trade at a modest discount to some of its international peers. Especially once you factor in its dividend and buyback track record.

Income appeal

BP’s dedicated dividend policy remains a core attraction for income investors. The dividend yield currently sits around 4.3%, with a 44‑year track record of paying shareholders. That’s a powerful signal of resilience, even if the payout has been cut and rebuilt over the past decade. 

But share buybacks are arguably a more critical factor right now.

Historically, the board has done well to support returns to shareholders through buybacks. But recently, it paused the programme to strengthen the balance sheet and slash debt.

Clearly, that’s a necessary move — but it needs to be carefully managed. The longer they remain paused, the longer it will take to rebuild investor confidence.

So when might that happen?

Looking ahead, a lot depends on geopolitics and oil prices. The main target is bringing net debt down to a range of roughly £14bn–£18bn.

With tensions around the Strait of Hormuz, the Middle East, and elsewhere, the risk of supply shocks is real. Spiking oil prices might boost its cash flow in the short term but likely hurt the wider market and weaken demand.

Alternatively, if conflict resolution brings down oil prices, the shares could take a short-term hit. But ultimately, if inflation falls and global markets improve, the net impact would be positive.

What this means for investors

For long-term shareholders, the sooner oil prices stabilise, the better. These price swings might be attractive for day traders but they do little to improve BP’s long-term prospects.

For now, it’s still worth considering for income, but the ongoing conflict adds risk with each passing day. In addition to a leveraged play on oil, it also carries macro and policy risk.

But there’s a lot of other attractive dividend stocks, with steadier earnings and less exposure to oil‑price swings. For example, Reckitt Benckiser, a highly defensive share with a 4.3% yield, or 6.5%-yielding Aviva, a largely domestic insurer with limited global exposure.

Whatever your preference, always assess a business on its long-term prospects rather than the short-term price volatility caused by current events.

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Investors in rival BP (LSE: BP) have even more to shout about. The oil giant has had a wretched time since the Deepwater Horizon catastrophe in 2010. That was followed by a messy U-turn on renewables, constant pressure from activist investors, and the relatively quickfire exit of two CEOs.

When I decided to add an oil stock to my SIPP 18 months ago, I chose BP because of its problems, not despite them. The shares were cheap, the yield topped 6%, and I saw recovery potential if it got its act together. I’m still not convinced the BP strategy is fully there, but the shares are up a mighty 63% over the last year and 33% over the last three, otherwise volatile, months. The dividend yield has slipped, but still pays a solid 4.26%.

Top FTSE 100 growth stocks today

Where both stocks go in the short run largely depends on events in Iran. Lately, investors have chosen to be more optimistic. Brent crude has eased back to $95 a barrel, and BP and Shell have retreated too. But if the Strait of Hormuz supply route remains under threat, shortages could bite quickly and oil and their stock prices could surge again. Over the next few weeks, anything could happen. But in the long term, this conflict could prove to be bad news for BP and Shell.

It’s reminded everyone just how essential oil and gas remain to the global economy. But it’s also revealed how exposed importing nations are to supply shocks. Until now, there was at least an assumption that key shipping lanes would stay open. That no longer feels certain. Hormuz has always been a potential chokepoint, but now it’s being throttled. All it takes is one cheap drone to stop a massive tanker.

The oil giants could slide

As a result, countries could accelerate plans to cut their reliance on imported oil and gas. China is ahead of the game, and major fossil fuel importers such as South Korea, India, South Africa, Turkey and Italy have fresh incentives to follow. Across Africa, micro-solar is expanding rapidly. Nobody wants to be at the mercy of geopolitical shocks.

If Iran tensions ease quickly, that urgency may fade, but a hard lesson has been learned. The world will still need oil and gas for years, not just for energy but for plastics, fertiliser and pharmaceuticals. Yet this could prove a turning point.

I think both BP and Shell are both worth considering today, as part of a balanced portfolio. But a vague long-term risk has suddenly come into sharper focus. There may be better long-term opportunities out there today.

The post Does the Iran war spell long-term disaster for BP and Shell shares? appeared first on The Motley Fool UK.

Time in the market

Not everyone has £10,000 available to invest as a lump sum. But the principle remains the same: over long time horizons, investing has historically outperformed holding cash.

Yet in periods of heightened volatility, many investors hesitate to invest and instead allow cash to sit on the sidelines. Over time, that caution can quietly turn into a habit — with money only being invested later, rather than immediately.

One common example of this is waiting until the end of each ISA season before putting money to work. While it may feel harmless in the short term, this repeated delay can have a meaningful impact on long-term portfolio growth.

£41k boost

The chart below illustrates this clearly. A £10,000 annual investment into a Stocks and Shares ISA over 20 years produces a noticeable difference in final portfolio value depending on when the money is invested.

Although the return assumption of 9% is identical in both scenarios, small differences in timing compound significantly over long periods. In this example, the gap builds to around £41,000.

To put that into context, using the 4% withdrawal rule, a portfolio of roughly £553,000 could generate around £1,845 a month in passive income.

Chart created by author

Where volatility creates opportunity

Periods of market hesitation don’t just affect when investors buy — they can also influence what they choose to buy.

When uncertainty rises, many investors step away from the market entirely, but others simply avoid certain sectors they believe are too exposed to volatility. That can create short-term mispricing in high-quality businesses that ultimately continue to generate strong cash flows over time.

An example is BP (LSE: BP.), which has seen investor sentiment swing sharply in recent years as energy markets, geopolitics, and strategy shifts have driven significant volatility in its share price.

Strong cash flows

One point often overlooked is that despite strategic missteps in its low-carbon transition and associated write-downs, BP has remained a significant cash-generating business.

The figures below highlight this clearly:

Last year, amid weak oil prices, the company still generated significant free cash flow, more than enough to support its growing dividend.

With prices now stronger, the business also has greater scope to accelerate balance sheet deleveraging than previously expected.

The new management team has already signalled a move towards simplification, with a sharper focus on its core upstream and downstream operations.

Of course, the business remains highly sensitive to oil prices, and a sharp fall — for example, if geopolitical tensions ease materially — would present a clear risk.

But oil markets have always been cyclical and volatile. For long-term investors, the key question is not short-term direction, but whether the underlying cash generation remains durable over time. With global energy demand still structurally supported, the current environment may be offering long-term investors an opportunity, even after the recent strength in the share price.

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Anyone spending £5,000 on the energy giant’s shares today would only be able to afford 149 of them. Does this mean it no longer makes sense to consider buying Shell’s stock? Let’s explore this further.

An unfortunate reality

It’s an uncomfortable truth that whenever there’s trouble in the Gulf region, Shell will be one of the beneficiaries. Unlike the vast majority of companies, soaring energy prices will boost its bottom line.

But commodity prices are impossible to predict with any accuracy. Their volatile nature means nobody knows with any certainty what Shell’s earnings are likely to be from one period to another.

Take the oil price as an example. Looking back to the start of 2005, the average monthly price of a barrel of Brent crude has varied from $18.38 (April 2020) to $132.72 (July 2008). Yes, it’s been over the psychologically important $100-mark during 55 of the past 255 months. But it’s also been below $55 in 50 of them.

Even so, the need for oil and gas, and the sheer size of Shell’s business, means that other than during the most exceptional of times – the pandemic is a recent example – it remains hugely cash generative.

From 2021-2025, it produced an enormous $265.3bn of cash from its operations.

But energy industry infrastructure is expensive and is often funded by borrowing. Indeed, the group’s net debt increased by $6.9bn to $45.7bn during 2025.

Not bad for income

In recent times, the group’s dividend has been pretty good.

From its adjusted earnings per share of $19.03 over the past five years, it’s returned $6.06 to shareholders. In cash terms, its 2025 payout was 62% higher than in 2021.

Although the recent surge in Shell’s share price has pushed its yield lower, the stock’s still paying 3.2%. This is slightly above that of the FTSE 100 as a whole.

However, it’s important to remember that dividends cannot be guaranteed.

My view

Although Shell is a reliable performer, I think there are better opportunities to consider elsewhere in the sector, like BP (LSE:BP).

Although it’s also affected by volatile energy prices and has a large debt pile, it’s part-way through a significant cost-cutting programme. And it’s selling some non-core assets to reduce borrowings.

Under shareholder pressure, BP’s actively seeking to address the fact that it has a lower margin than its larger rival and, even though it generates less revenue, it employs more people.

All companies in the sector will see their revenue move up or down in line with energy prices. But I think that BP, by becoming leaner and more efficient, will outperform Shell — relatively speaking — over the next few years.

And with a yield of 4.2%, its dividend is more generous.

On this basis, for investors who are comfortable with the sector, I think BP could be a stock to consider. But only by those who are prepared to take a long-term view and will be able to ignore the volatile nature of the group’s revenue and earnings.

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Indeed, the group’s share price is currently (15 April) 19% higher than when the current conflict started. Admittedly, it’s fallen back from its 52-week high of 609p. But BP’s shares are still changing hands for 66% more than they were a year ago.

However, with the current ceasefire just about holding, is now a good time to consider buying the group’s shares? Let’s take a closer look.

The art of the impossible

If we needed reminding, we’ve learned over the past few weeks that oil and gas prices are impossible to forecast accurately. On 10 February, the US Energy Information Administration released its short-term energy outlook. It said it expected Brent crude to average $57 per barrel in the second quarter of 2026. Today, it’s around $95, having peaked at $110 in early April.

Of course, economists can’t predict when a war will start. But the unpredictable nature of commodity prices makes it difficult to build an investment case for BP. With earnings hugely influenced by volatile energy prices, investing in the company carries more risk.

Looking into the future

However, by taking a long term view, it becomes a little easier. That’s because, despite the move to a greener world, the demand for oil is continuing to rise. Although there’s little agreement as to when ‘peak oil’ will come — I’ve seen forecasts ranging from 2030 to 2050 — we will still need hydrocarbons for decades to come.

And based on current prices, BP has over $600bn of untapped reserves. In 2025, it made its largest discovery for 25 years.

Other factors

Another positive is that the group’s trying to become leaner. It’s also working hard to reduce debt. With lower overheads and reduced borrowing costs, this is likely to help improve its margin. This should offset some of the impact should energy prices fall.

Also, due to its capacity to generate huge volumes of cash — even when energy prices have been much lower than they are today – BP has established a reputation for being a decent income share.

Of course, there can never be any guarantees when it comes to dividends. BP’s payout was suspended during the Deepwater Horizon tragedy (another reminder of how risky the sector can be) and it cut its quarterly dividend by 50% during the pandemic. However, since then, a series of gradual increases means it’s now at 75% of its pre-Covid level.

Even so, the recent surge in its share price has pushed its yield down to 4.3%. Although this is still above the FTSE 100 average, it was over 6% a year ago.

Final thought

Hopefully, the war in the Middle East will end soon. If it does, energy prices are likely to fall significantly and BP’s share price will probably drop too. On this basis, I don’t think now would be a good time to consider buying.

However, those comfortable with the sector, could take another look when current tensions ease.

The post At 570p, is it too late to consider buying BP shares? appeared first on The Motley Fool UK.

This was driven by high energy prices, aggressive share buybacks and some of the strongest cash flows BP has generated in years.

That said, the firm is now targeting even higher returns from its key businesses, while continuing to prioritise shareholder distributions.

So is now exactly the right time for me to buy more of the stock?

Where’s the growth coming from?

The share price and dividend trajectory of any firm are ultimately driven by earnings (profits) growth. A risk to BP is any sustained period of much lower oil and gas prices, which could squeeze its margins. Another is the rising cost of its energy‑transition strategy, which could pressure free cash flows over time.

Nonetheless, analysts forecast that BP’s earnings will grow a whopping average of 23% a year over the medium term. And this looks well supported by its recent results.

The numbers showed record operational performance, with upstream plant reliability hitting 96.1% and refining availability reaching 96.3%.

The metrics are important, as high reliability directly lifts volumes and margins, which in turn support dividend cover and long-term growth.

Meanwhile, operating cash flow came in at a whopping $24.5bn (£17.9bn), despite softer commodity prices over the period.

Are the shares still undervalued?

Just because a stock’s price has risen a lot does not mean no value remains in it, because price and value are different things. Price is whatever the market will pay at any given moment, while value reflects the underlying business’s fundamentals.

The difference between the two is crucial for the profits of long-term investors. This is because share prices tend to converge to their ‘fair value’ over the long run.

Discounted cash flow analysis identifies where any stock should trade by projecting the future cash flows of the underlying business. The outcomes of different analysts’ DCF modelling vary, depending on the data used. However, my modelling — including a 7.3% discount rate — shows BP shares are 39% undervalued at their current £5.79 price.

This suggests a fair value for the shares of around £9.49 — nearly double where they trade today.

So the gap here between price and value suggests a potentially superb buying opportunity to consider today if those DCF assumptions prove accurate.

My investment view

It is not just the huge potential share price gains I am eyeing from BP, but sizeable dividend returns too. It currently generates a dividend yield of 4.3% — well above the present FTSE 100 average of 3.1%. But analysts forecast this will rise to 4.7% by 2028 — although it could go down or up over time.

So, my £20,000 holding in the oil giant would make £11,971 in dividends after 10 years and £61,694 after 30 years. These numbers reflect the forecast 4.7% yield and the dividends being reinvested back into the stock.

After 30 years, my holding would be worth £81,694 (including the £20,000 initial investment). And this would pay me £3,840 a year in dividend income!

Given this income stream and the strong potential share price gains, I will buy more of the shares very soon.

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