A quick recap of how stock markets are doing in 2024. The US S&P 500 index has leapt 9.4% since 29 December, while the tech-heavy Nasdaq Composite is close behind with an 8.6% gain. Meanwhile, the UK’s FTSE 100 has moved up just 2.7%. But the BP (LSE: BP) share price has easily beaten its parent index.
BP bounces back
At its 52-week high, BP stock briefly hit 562.3p on 18 October 2023. It then fell steadily until bottoming out at 441.05p on 22 January. At this point, it had lost 5.4% since the turn of the year.
As I write, the BP share price stands at 511.3p, valuing this oil & gas supermajor at £86.3bn. This makes the group the fifth-largest Footsie firm. What’s more, the shares have rebounded 15.9% from their January low.
Should you invest £1,000 in Babcock right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Babcock made the list?
Here’s how this widely held stock has performed over six timescales:
| Five days | +1.4% |
| One month | +8.2% |
| Six months | -1.8% |
| YTD 2024 | +9.6% |
| One year | -4.9% |
| Five years | -10.5% |
My table show BP’s recent price momentum, with its stock rising over five days, one month, and in 2024 so far. I suspect this trend is down to the rising oil price, with the cost of a barrel of Brent crude leaping by 19% this calendar year.
Then again, over one year and five years, this well-known British business has delivered negative returns to its shareholders. Oops.
What about dividends?
It’s important to note that the above figures exclude dividends, which are very generous from some FTSE 100 firms. The Footsie itself offers a cash yield of 4% a year — far ahead of rival stock indexes.
As for BP, its shares offer a dividend yield of 4.4% a year, but its cash payouts have risen for the past two years. The total dividend has climbed from $0.22 for 2021 to $0.24 for 2022 to $0.28 for 2023. That’s a welcome rise of 27.3% in 24 months.
What’s more, while future dividend distributions are not guaranteed, they look well-covered to me. BP shares trade on a multiple of 7.4 times earnings, delivering an earnings yield of 13.5%. This means that the trailing dividend yield is covered almost 3.1 times — to my mind, a solid margin of safety.
Energy stocks can be volatile
That said, history has taught me that energy and commodity stocks can be wildly volatile, with the BP share price no exception. Also, energy prices themselves gyrate in ways that are fiendishly difficult to predict.
For the record, my wife and I own BP stock as part of our diversified, balanced family portfolio. We bought in mid-August 2023, paying 484.1p a share for our stake. To date, we are sitting on a modest paper gain of 5.6%, excluding dividends received.
Of course, to reduce global CO2 emissions, the world needs to move away from burning fossil fuels. Hence, BP faces a difficult transition to a low-carbon, renewable-energy future. But this will take many decades, so we will hold tightly onto our BP stock for now!
