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BP Tops Survey with Highest Dividend Yield, Average Valuation

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BP’s dividend yield

BP (BP) occupies the top slot on our list of top eight dividend-yielding integrated energy stocks. The company has the fifth-largest market cap of $143.0 billion among the eight stocks being discussed in this series.

BP has a current dividend yield of 7.0%. In the current quarter, BP plans to pay a dividend of $0.615 per share (or ADR). BP has consistently paid dividends despite oil price volatility in the past three years, and its dividend has risen during this period. Three years ago, BP made a quarterly dividend payment of $0.60 per share. In the past three years, BP stock has risen 42.0%.

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Valuations

BP trades at a forward PE (price-to-earnings) multiple of 12.4x, which is equal to the average forward PE multiple of 12.4x. BP trades at a 4.7x forward EV-to-EBITDA[1. enterprise value to earnings before interest, tax, depreciation, and amortization] multiple, which is below the peer average of 5.1x. The stock shows a mixed trend due to high growth prospects but high leverage.

Wall Street analysts expect BP’s earnings to grow 77.0% in 2018. This earnings growth is above the peer average growth rate of these eight companies, which stands at 57.0% for 2018. BP has a robust pipeline of upstream projects that it expects to result in hydrocarbon production growth. Also, higher oil prices could boost BP’s earnings.

However, BP’s total-debt-to-total-capital ratio stands at 37.0%, higher than peers ExxonMobil (XOM), Royal Dutch Shell (RDS.A), and Chevron (CVX). The total-debt-to-total-capital ratios of XOM, Shell, and CVX stand at 18.0%, 29.0%, and 20.0%, respectively.

Nevertheless, BP’s debt position has been improving. BP’s net-debt-to-EBITDA ratio has fallen below the industry average in the second quarter. BP’s cash flows from operations have risen year-over-year in the first half of the year. Going forward, BP’s financials could strengthen with improved earnings, cash flows, and debt and liquidity position.

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