Is now the time to buy BP's 6% dividend income?: The BP settlement for claims related to the Gulf of Mexico disaster removes one of the biggest hurdles to investing in the U.K.'s second-largest oil company. If there is one thing that investors hate most, it is uncertainty. While losses can be understood and priced into shares, uncertainty cannot. Now, though, certainty is returning as the total cost of the oil spill is becoming clear. That means that the company is probably headed for a first half loss. This will become clearer when it unveils second quarter results on July 28. There is, however, some good news. The settlement not only provides closure for BP and the Gulf, but the payments will be spread over an 18-year period, easing the financial blow and making it much easier to make an investment call on the shares. The deal still needs to be approved by a federal judge, but this is widely expected to be rubber-stamped at the end of the year. Serious damage has been done to the BP business from five years of compensation payments and the more recent collapse in the oil price. BP has other headaches, too. The company received just under $700 million in dividends in July 2014 from its 19.75% stake in Rosneft, the Russian oil major. The collapse of the Russian rouble and falling oil prices could see payments from Rosneft greatly reduced this year. Despite the challenges ahead, there is reason to be positive. The loss of Rosneft payments are manageable and BP should still be able to fund its dividend. Moreover, there's the possibility of M&A. Investors should never buy on the hope of a takeover, but the settlement certainly clears the way for one. Admittedly, BP has a tough 18 months ahead of it and cash will be getting tight. That said, long-term investors will enjoy a 6% dividend yield in the meantime. The company now has a clear route to a more stable future and that is more closely reflected in the revenue and profits of the 2017 numbers. The shares are not yet suitable for widows and orphans, but for those with an appetite for risk, they rate a Buy.
I agree this is indeed welcome, and probably about as good as BP could've hoped for given that it is spread over many years and a significant % is tax deductible. Though it does seem somewhat out of line compared to what the others who were also deemed to be responsible, by the courts, paid. I guess one of the lessons to be learned - by all corporations who do business in the US - is it may not pay to try and do the right, and honourable, thing. remember BP voluntarily waived the cap on costs (it was $75m) and it has ended up costing them ca $55-60bn.
BUZZ-BP: market cheers Gulf spill settlement 03 July 2015 08:40 * BP <BP.L> shares up c.2 pct, after rising 5 pct yesterday, following news of its settlement to resolve claims from its Gulf of Mexico oil spill five years ago * Upgraded by JP Morgan to "overweight" from "neutral"; PT raised to 475p * "By bringing unexpectedly early and essentially complete closure to the key tail risks to this tragic event BP becomes more investable to some institutions," analysts at JP Morgan write in a note * Goldman Sachs also raises PT to 376p * Over 6 million shares traded on London Stock Exchange, more than double their full-day average trading volume * Most traded by average 30-day volumes on FTSE 100 <.FTSE> * Best two day run for stock since January
This should open up above 440 this morning now the news about the settlement is out there and being digested by investors . Hopefully we get back upto 470- 500 levels soon, oil price permitted as well .
Chandley76, There is a name from the past! I understand you sold your holding for a house purchase, hope all is well?
I too am out of BP. prefering to invest in RDSB of recent. I too echo your sentiments, I am glad that a line is drawn in the sand. This is an affordable amount for BP. which will allow it to move forward. I still feel that it is a lot given that BP. really are not the only culprits here however it is affordable.
Good luck to all holders. And yes, I wonder if a take over is on the cards. It would be foolish to rule one out!
Hope some of you listened this morning and did your own research and jumped on board. Just got back in and delighted to see this jump. Bought 8000 shares this morning although I knew how often we get rumours but for once CNBC got it right. Certainty is everything in this business and there was always the gross negligence charge hanging over our heads here. Dont like predicting prices , got it awfully wrong once here, but enough to say that I am holding these shares for the time being
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