Monday, March 24, 2008
* Stock Analysis: BP Plc (BP)
Linked here is a PDF copy of my detailed analysis of BP Plc (BP) (alt.1, alt.2). Below are some highlights from the above linked analysis:
Company Description: This supermajor integrated oil company (formerly BP Amoco p.l.c.) is the world's second largest publicly owned oil company and the fourth largest U.S. refiner.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description: 1.) Avg. High Yield Price, 2.) 20-Year DCF Price, 3.) Avg. P/E Price and 4.) Graham Number. BP is trading at a discount to all but 4.) above. If I exclude the high and low valuation, and average the remaining two valuations, BP is trading at a 26.3% discount. BP earns a Star for trading at a fair value.
Dividend Analytical Data: In this section I consider five factors, see page 2 of the linked PDF for a detailed description: 1.) Rolling 4-yr Div. > 15%, 2.) Dividend Growth Rate, 3.) Years of Div. Growth, 4.) 1-Yr. > 5-Yr Growth and 5.) Payout 15% of avg. BP earned a Star in 4.) above. It's one year dividend growth exceeded its 5-year growth rate. This could indicate the dividend growth rate is accelerating.
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description: 1.) NPV MMA Diff. and 2.) Years to >MMA. BP earned both available Stars in this section. Its current yield of 5.40% is in excess of the high-yield MMA rate of 4.61% and its NPV MMA Diff. is $22,113.
Other: BP is NOT an S&P 500 Dividend Aristocrat or a member of The Broad Dividend Achievers™ Index. It has increased its quarterly cash dividend payments for 8 consecutive years.
Conclusion: BP earned one Star in the Fair Value section, one Star in the Dividend Analytical Data section and two Stars in the Dividend Income vs. MMA section for a total of four Stars, which rates it as a 4 Star-Buy.
For some time now I have been looking for a suitable energy company to add to my dividend income portfolio. The numbers have not worked for the companies reviewed up to this point. Though not perfect, BP's numbers have been the best so far. BP's primary blemish is a dividend cut of 20% in 2000 after a 26% dividend increase in 1999. One other concern is the 10-year average historic payout ratio is 60%. However, the last four years payout rate have been reasonable in the 30's. I will continue to perform a qualitative assessment of BP, but early indications are pointing toward a possible April purchase.
Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.
Full Disclosure: At the time of this writing, I do not own shares of BP (0.0% of my Income Portfolio).
What are your thoughts on BP?
Recent Stock Analyses:
Popular Posts - Last 7 days
Presented below are my dividend stock and ETF/CEF holdings. This is not a recommendation to buy these securities. I have classified some of...
Each Sunday I highlight any notable articles that I came across over the past week, along with any Carnivals I participated in. For those re...
To succeed as a dividend growth investor you must identify and purchase stocks with sustainable dividend growth. Inertia is powerful force....
For many investors, there is no clear conviction as to how they should invest. Today's investments are guided by what was read or heard ...
Linked here is a detailed quantitative analysis of Medtronic Inc. (MDT). Below are some highlights from the above linked analysis: Compan...
Linked here is a detailed quantitative analysis of Cisco Systems, Inc. (CSCO). Below are some highlights from the above linked analysis: ...
Yield does not come without a price, usually in the form of added risk and/or complexity. Ultimately, dividend growth investors realize that...
If your goal is to accumulate wealth for a comfortable retirement , then there is no risk-free path. Throughout time every angle has been tr...
Monday, October 31, 2011 will mark my fourth full year of writing as Dividends4Life . It is hard to believe another year has passed. Like th...
Like many that came before me, I am on a journey to construct a portfolio that will provide me... Dividends 4 Life