Tuesday, October 25, 2011

BP's High Dividend Yield

Oil companies have not been in the news recently since oil prices have been declining. Oil has spent a large amount of the summer and fall trading in the $80 range and below. This has caused a lot of investors to abandon the sector. That is a big mistake because there are some great dividend plays in the oil and gas sector. Here is one of the stocks that is offering up a nice yield.

BP (BP) has not been an investor favorite since the big oil spill that took place a few years ago. The company booked billions in losses paying off claims and cleaning up the ocean where the spill took place. BP eliminated its dividend which had been one of the best in the entire sector. The bad times appear to be behind BP and the company’s future is looking bright.

BP’s net income tripled this past quarter with the company booking a $4.9 billion dollar profit. That is a pretty solid number considering the fact that the company had to curtail its drilling after the disaster in the Gulf of Mexico. The Gulf was one of the primary drilling areas for BP and the company is finally going to start ratcheting up production again. The company’s output should return to pre-spill levels.

The CEO of BP is bullish on the company as well stating that BP has reached a turning point and believes that the best earnings numbers are ahead of the company. Investors have reason to smile as well since BP has reinstated its dividend and the stock is a serious high yielder.
BP pays a dividend of $1.68 per share which is just a 13% payout of earnings. The company is loaded with more than $20 billion dollars in cash on its balance sheet and generates nearly $9.5 billion dollars in operating cash flow. Shares are currently trading at just 1.2 times book value and the stock is yielding 4%. That is a solid yield and the dividend should only increase as operations continue to go back to normal at BP.
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