BP's 5.17% Yield Pays to Wait for Pro...
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Apr
11
Jonathan Yates
BP’s 5.17% Yield Pays to Wait for Problems to Go Away
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Major oil and natural gas companies such as BP (NYSE: BP) were given a boost by the release of the Federal Reserve minutes from its Open market Committee meeting.

The details of the meeting revealed that the Federal Reserve will continue it policy of buying about one trillion dollars worth of Treasury Bonds, mortgage-backed securities and other assets annually.  This is part of Chairman Ben Bernanke’s efforts to maintain a low interest rate environment to stimulate the housing market and overall economic recovery.

This is very bullish for companies in the energy sector such as BP.  The first reason is that quantitative easing measures, where the central bank buys the government bonds, drive down the value of paper assets.  Dollars, Yen, etc… all fall in value as investors sell paper assets and buy hard assets such as oil.  When oil rises, so does the price of B

The next factor is that the fundamental economic demand for oil is still developing.  When that fully emerges, the stock price for BP and other oil companies  should rise even more.  China, India, Brazil, and other major energy users are starting to to emerge from The Great Recession.

Another positive for BP is that is should be able to leave its legal problems behind it.  Recent market action has been promising.  As time goes by, the outlook should be even more bullish for BP.

It has not been a bad run already for BP.  The share price is higher for the last week, month, six months and year of market action.   For the last month of trading, BP has risen by 3.39%.

Now trading around $40 dollar a share, the mean analyst target price for BP over the next year is $51.24.  As the chart below shows, BP has a long way to go to catch up with other majors that have surged, such as Chevron (NYSE: CVX), which was reviewed in another article on this site.  A dividend yield of 5.17%, more than twice the average for a member of the Standard & Poor’s 500 Index, pays shareholders to wait for the share price rise of BP.



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