Prediction: by 2026 BP’s share price and dividend could change £10,000 to…
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I dreamed about BP (LSE: BP) price last night. In fact, it was a nightmare, because so much went wrong FTSE 100 the oil giant. Will I sleep easy if I sell?
These are tough times for BP. Over the past 15 years it has faced the Deepwater Horizon disaster and the costly spill that followed, a massive shutdown in Russia, leadership turmoil, poor innovation and faltering profits and gains. No wonder I couldn’t relax easily.
Volatile FTSE 100 stock
I got up and got ready to bail and then I remembered something. paid a dividend of 5.6 %. But is that enough to compensate for the volatile share price? BP shares are up just 1.3% over the past year, and down 10% over the past three.
I was still ready to sell BP and use the cash to replenish my stake in the FTSE 100 dividend hero. Legal and General Groupbut something stopped me. This morning, Brent crude moved $ 65 a barrel amid renewed concerns about Venezuela, Iran, Ukraine and global supply. I expected BP’s share price to rise as well, and disrupted my sales plans.
But instead of rising, shares went south as BP warned of a looming $5bn impairment charge in Q4, mainly related to its energy conversion and weekly oil trading businesses. Such a BP.
Energy stocks like BP are subject to shocks and surprises. Just look at what happened after Putin invaded Ukraine in 2022: the price of oil exploded, followed by BP shares, and then both retreated as Europe drained Russian power. Stocks jumped last week when markets saw a big opportunity in Venezuela, then quickly fell when they didn’t.
Analysts are bullish on next year, according to a one-year price target of 502p. If correct, that’s about 16% above today’s 432.5p. A forecast yield of 5.8% gives a total return of 21.8%, which would turn a £10,000 investment into £12,180. Although given the swings I mentioned, this is far from guaranteed.
There are reasons to be excited about BP. It generated $27.3bn in cash flow by 2024, despite lower profits due to lower refining margins and trading results. As well as the budget, the board has enough cash to finance a quarterly share buyback of $750m.
Taking a long-term view
Although the world is slowly transitioning to renewables, it still needs oil and gas to manage the transition. Also, BP’s made some big acquisitions lately, especially in Brazil.
Because of climate change concerns, many investors will not want to touch BP at all. And BP has been mismanaged for years. Turning this cart around will not be easy.
But I still think from a long-term perspective, so it’s worth considering as part of a balanced portfolio. I certainly won’t sell, oil and gas is an important sector and I have no other exposure to it.
As always, it’s important to take a long-term view. The big question is not where BP shares are going today or tomorrow, but in five or 10 years. For me, the income and long-term potential make it worth holding on to, even if the day-to-day fluctuations sometimes keep me up at night.
