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BP (LSE: BP) shares are a FTSE 100 fixture, and loads of retirees already depend on their dividends to high up their pensions. However this doesn’t make them a rock stable funding. They’ve been wildly risky over the past 15 years and, for all we all know, that might proceed.
The BP share value has climbed steadily since April, however it’s nonetheless solely 12% greater than a yr in the past, and down 18% over two years. I purchased the oil and fuel big final yr, hoping to learn from a restoration. It hasn’t actually obtained going but although.
FTSE 100 underperformer
There are causes to stay cautious of BP. It is a firm that spent years edging into renewables, solely to retreat when the going obtained too bumpy. I by no means felt it believed within the inexperienced transition anyway.
The shares rocketed after Russia’s invasion of Ukraine in 2022, then slipped as Europe secured different provides. Though BP’s extra than simply an oil explorer, its fortunes do are inclined to ebb and stream with vitality costs.
I’d wish to say that the board has paid out a stable stream of excessive and rising dividends all through, however that’s not the case. BP froze shareholder payouts at 40 US cents a share in 2016 and 2017. It then reduce them twice within the pandemic, and re-started them at a decrease charge of 21.63 cents in 2021. By 2024, that climbed to 31.27 cents, however that’s decrease than a decade in the past.
So what number of BP shares would an investor must generate £100 a month, or £1,200 a yr, in passive revenue? As I’m writing, BP’s share value is 434.05p. I anticipate the full-year 2025 dividend per share to return in round 34 cents (roughly 24p).
To hit that £100 a month second revenue goal, an investor would wish precisely 5,000 shares (weirdly). At at the moment’s value, that involves about £21,700.
That’s a hefty sum to position in a single inventory, significantly for somebody beginning out. Constructing that place steadily, or higher nonetheless spreading it throughout a number of revenue shares, is a safer method to attain the identical purpose over time.
Valuation puzzle
On paper, BP seems to be overpriced. Its trailing price-to-earnings ratio is a frightening 242, skewed by a 97% earnings stoop in 2024. The ahead P/E of 14.5 is extra smart. For traders making an attempt to make sense of those numbers, brushing up on different strategies of valuing shares may very well be helpful.
Underlying alternative price revenue (BP’s most well-liked measure) fell nearly 15% to $2.35bn within the second quarter of 2025, however that also beat of forecasts. The dividend was lifted 4% to eight.32 cents a share, and share buybacks continued at $750m. Web debt stays near $30bn, however with annual revenues nearing $190bn, administration has room to chip away.
BP at the moment has a trailing yield of 5.57%, comfortably above the FTSE 100 common of three.25% at the moment. If dividends proceed to develop, and traders pump them again into the inventory, the variety of BP shares required to safe £100 a month might shrink over time. After all, oil and fuel stay cyclical and earnings might be bumpy, so payouts aren’t assured.
I feel BP’s nonetheless one to contemplate shopping for, however solely for individuals who perceive it comes with dangers too.
