BP is all things oil and gas. From exploration to refining and selling, it’s among the world’s largest integrated oil companies.
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Maintains reserve replacement at 2008 production levels for 43 years. Has a dividend yield approaching 9%. Trades on a p/e of 5.6 (comapred to an average p/e of 16 for the FTSE 100). Pays 18% of the dividends of the entire FTSE 100. State paper is paying less than 1% per annum in interest. Despite the fall in crude the refining side of the business has seem a 100% increase in margins for Q1.. meanwhile crude has still averaged $44 pb during Q1 2009, entailing that there is no threat to the dividend.
Last but not least, BP trades at an enormous discount to Exxon, despite almost identical EPS Exxon trades at an 86% premium to BP. Why? Does Exxon's crude smell better?
Five months later, Idioterna's take still makes sense to me. BP's dividend isn't protected by earnings as well as say, CVX or XOM's, so to believe in it we have to believe in resilancy of oil and nat gas prices. Buffet said in May he believed oil prices would be much higher long-term than at trough, so betting on the dividend isn't unreasonable. BP operating ratios lag CVX and XOM as well, but it's proven reserves are greater than theirs, relative to annual production. I would like a pullback, but would start to buy around 50.