Buying British Petroleum stocks makes sense for investors looking to gain exposure to energy/oil. The company is the fourth biggest oil company in the world, after China’s PetroChina, Sinopec, and Aramco of Saudi Arabia.
Before you venture into energy stocks by purchasing BP shares, here’s what you should know about the company.
- In addition to oil and gas exploration and extraction, BP also deals in trading and distribution.
- The company produces lubricants, fuels, and various petrochemical products.
- As of August 2021, BP’s market capitalization was $83.91 billion.
- Present in 70 countries, BP produced 2.4 billion barrels of oil a day in 2020.
- Investors can buy ordinary BP shares at the Frankfurt and London stock exchanges.
- The NYSE offers access to American Depositary Shares. One ADR BP share is the equivalent of six ordinary shares.
As of June 2021, the company had 283,569,587 shares. The largest holder of these shares is State Street Corporation of Boston, Massachusetts, owning roughly a 9.5 percent stake in BP.
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The second-largest shareholder is BlackRock Inc, owning a stake of about 5.7 percent in the oil company. BlackRock is an investment management firm, and BP being an integral part of its portfolio gives retail investors a great clue regarding the profitability of BP stock.
Owning a stake of 5 percent, Dimensional Fund Advisors is the third-largest BP stockholder. DFA is also an investment management firm, with institutional and retail investors among its clients.
The fourth-largest BP stakeholder is Fisher Investments, a private investment management company based in the US. Fisher Investments has enough BP shares for a 4.2 percent ownership of the company.
Israel’s Menora Mivtachim Holdings Ltd. rounds out the top five BP shareholders. Menora Mivtachim is an insurance company that owns a 3 percent share in BP.
As you can see, if you become a BP investor, you will be in an illustrious company. There is a reason why some of the world’s top investment management companies deem BP stock worthy of holding.
Institutional investors currently hold 9.32 percent of all existing BP ADR shares.
Is BP Still Profitable?
With the world gradually shifting away from fossil fuels toward sustainable, green energy solutions, some may question whether traditional energy companies like BP still have a bright future. The answer to that question seems to be yes for now.
Due to their unique positions in the energy markets, companies like BP are most likely to embrace green technologies and continue to hold market-leading positions in the future.
The company intends to invest GBP 18 billion in offshore wind projects and electric vehicle charging points in the UK.
The quarterly adjusted profits of the company in the first quarter of 2022 were $6.2 billion, handily exceeding the predictions of the experts. These profits were also the company’s highest in a decade. Regardless of unfolding energy trends, BP is now more profitable than ever.
In the short term, due to China’s Covid lockdowns and the energy embargo the EU is pushing against Russia, against the backdrop of the war in Ukraine, oil prices are likely to remain at their current levels or soar higher. BP’s short-term profitability seems ensured.
The company has plenty of cash at hand and it has engaged in a share buy-back program, further highlighting the trust it has placed in its continued profitability.
That is not to say that BP hasn’t felt the impact of the energy sanctions against Russia.
- Earlier in the year, BP had to cut its share in Russia’s Rosneft. The move will impact its future earnings.
- Due to the energy crisis that resulted from the war and ensuing sanctions, governments around the world are under pressure to alleviate the impact of mounting energy bills on the population. One way they may try to achieve their goal is through windfall taxes levied on energy companies like BP.
In addition to appreciating share value, BP stock offers investors another source of revenue in the form of dividends.
On average, BP ADR stocks pay out 26.21 percent of the net profits as dividends. The payout ratio translates to a 4.79 percent annual return on shares. Unfortunately, these numbers reflect past dividend payouts only. They offer no guarantees for the future, as dividend payout rates may fluctuate.
BP has not floated the idea of an upcoming share split. The only BP share split occurred in 1999. Everyone who owned a share woke up with two shares representing the same value.
Stock splits set the stage for share price explosions. They may not add direct value to the shares, but they make them more accessible and attractive to a wider range of market participants. When more investors pour more money into a stock, its price goes up.
Is BP Stock Accurately Valued?
Evaluating the accurate price of BP stock during these turbulent times is a complex exercise that is unlikely to yield unequivocal answers.
The PEG ratio, which is 0.25 in BP ADR’s case, offers a broad picture of a stock’s profitability. The lower the ratio, the better the value of the stock is.
EBITDA is also a good measure of profitability. In BP ADR’s case, it is $25.3 billion. EBITDA denotes the earnings before interest, taxes, depreciation, and amortization.
How Can You Buy BP Stock?
Your first step is to find a share trading platform that offers you brokerage services and not just access to some financial derivatives that use the BP share price as their underlying asset.
Compare trading platforms and pick the one that suits your needs. Ensure that you are dealing with a reputable operation and not an ad-hoc derivatives trading platform.
Open a brokerage account and fund it. Instruct your broker to purchase BP shares for you in the amount you specify.
Wait for the market order to complete. Once it does, you are a BP shareholder. Being a BP shareholder entitles you to certain benefits you should research and understand before you commit to the investment.