BP has a 5.4% dividend yield and the share’s up 65%. Time to buy?
Over the past five years, the BP (LSE: BP) share price has gone up by 65%. That is not the only thing about it that grabs my attention: BP has a dividend yield of 5.4%. That significantly beats the FTSE 100 yield of 3.4%.
So, could now be the time to add the share back into my portfolio, having owned it in the past?
BPâs dividend history is mixed
Dividends are never guaranteed. BP demonstrates that, having cut its payout per share in 2020.
It was not the only UK oil major to do so. Shell made the same move and arguably that was a much bigger shock, as Shell had not cut its dividend since the Second World War.
Still, US rivals like ExxonMobil (with its decades-long streak of annual dividend per share growth) did not reduce their payout at that point.
Since then, BP has grown its payout per share annually, but it still has not even got back to where it stood before the 2020 cut. That has made me a bit more hesitant when considering the BP dividend. The company has proven willing relatively recently to cut it rather than making tough choices that could have helped maintain it.
Still, at 5.4%, the yield is attractive.
For now, at least, I think BP can maintain its dividend, although the risk of any prolonged slump in the energy market could put that at risk.
Share price growth has stalled
While the five-year performance of the BP share price has been solid, over the past year the price has been flat.
That compares to 10% growth in the FTSE 100 index during that period. In fairness, though, BPâs performance is much of a muchness with Shell. Its share price has inched up just 1% over 12 months.
There is a lot of global geopolitical and economic uncertainty at present. That helps explain investor nervousness about the outlook for energy prices.
On one hand, geopolitical uncertainty can help boost oil prices. However, economic uncertainty has raised questions about whether global energy demand will hold up, or start to fall.
While that risk remains, I think it will continue to weigh on the share price of BP and its peers.
No rush for me to invest
So, while I think BP has a lot going for it, from sizable reserves to an improved strategic focus over the past couple of years, I see no compelling reason to invest right now.
Sure, the BP dividend yield appeals to me. But dividends are never guaranteed to last, as BPâs long-term shareholders know only too well. Meanwhile the share price growth of the past five years appears to be over, for now, at least.
The current BP valuation does not grab me as especially attractive and a dividend yield above both the FTSE 100 and Shellâs does not change that for me. For now, I have no plans to invest.
The post BP has a 5.4% dividend yield and the shareâs up 65%. Time to buy? appeared first on The Motley Fool UK.
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C Ruane 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.
