Why BP Stock Is Up By 6% Today
BP Raises Dividend And Announces New Buyback Program
Shares of BP gained strong upside momentum after the company released its second-quarter results. BP reported revenue of $37.6 billion and GAAP earnings of $0.92 per share, exceeding analyst estimates.
The company has also increased its dividend by 4% and announced that it would execute a share buyback of $1.4 billion prior to announcing its Q3 2021 results. A strong buyback program which will be completed in just several months provided additional support to the stock during the current trading session.
BP has also noted that the company expected that it would be able to deliver buybacks of about $1 billion per quarter in case Brent oil price stays around $60 per barrel. Currently, Brent oil trades near the $72 level. In addition, the company has the capacity to increase its dividend by around 4% annually through 2025.
What’s Next For BP Stock?
BP shares remain attractive for income-oriented investors after the recent increase of the dividend, and such investors may provide additional support to the company’s stock in the upcoming trading sessions. The new buyback program and the company’s plans to buy back $1 billion of its stock each quarter will serve as additional catalysts.
Analysts expect that BP will report earnings of $2.8 per share in 2021 and a profit of $3.12 per share in 2022, so the stock is trading at roughly 8 forward P/E which is very attractive in the current market environment. Earnings estimates have been trending higher in recent weeks and will likely move even higher after the solid second-quarter report.
The main risk for BP shares right now is the potential sell-off in the oil market, which could be triggered by problems with coronavirus in China. However, internal positive catalysts may provide enough support to BP shares even in this negative scenario. In case oil prices stay near current levels, BP stock will have a good chance to get back to yearly highs due to solid financial performance, higher dividend and a new buyback program.
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