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BP Boasts the Second-Best Dividend Yield

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May. 28 2019, Published 3:08 p.m. ET

BP’s dividend yield

BP (BP), with a dividend yield of 5.9%, is the second-highest yielding stock after Royal Dutch Shell (RDS.A), which has a dividend yield of 6.0%. BP’s dividend yield has risen from 5.6% in Q2 2018 due to its dividend rising and stock price falling. This quarter, BP’s dividend is set to rise 3% year-over-year to $0.615 per share (or ADR). BP stock has fallen 9% this year and 4% this quarter.

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Valuation

BP’s forward PE multiple is 11.1x, below peers’ average of 12.4x. BP’s forward EV[1.enterprise value]-to-EBITDA multiple of 4.6x is also below peers’ average of 5.4x, likely due to its lower expected earnings and financials.

Analysts expect BP’s earnings to fall 8% this year due to lower oil price estimates. However, BP’s robust pipeline of upstream projects could grow its hydrocarbon production.

BP’s total debt-to-total capital ratio was 43% in Q1 2019, whereas Royal Dutch Shell’s, Total’s (TOT), and Suncor Energy’s (SU) ratios were 32%, 33%, and 30%, respectively. BP’s liquidity position also tightened in the quarter. Overall, BP has a higher dividend yield than peers but weaker financials.

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