Lloyds

The Lloyds share price had dived 2% when these transactions were reported. But that didn’t stop a number of insiders purchasing shares via the company’s share incentive plan (SIP).” A SIP is an employee plan for companies within the UK to award equity to employees flexibly. Publicly listed companies normally exercise this option because it’s tax-efficient for both the employer and its employees.

Breaking down the director dealings, it seems that all but Harmeen Mehta purchased shares via Lloyds’ SIP. Within certain transactions, there are partnership shares and matching shares. The former is an invitation to buy shares via deductions from salary pre-tax and National Insurance Contributions (NIC). The latter is an add-on to when partnership shares are offered, where a company matches the number of partnership shares of up to a maximum ratio of two-to-one. Matching shares must normally be held in a trust for at least three years, and held for five to get a full tax relief.

Rolls-Royce

Rolls-Royce had a rather eventful week. Prior to reporting its Q1 2022 trading update, the firm had a slew of director dealings that were reported on Monday and Wednesday. Most notably, a number of high profile directors and executives redeemed and offloaded a large number of shares. Under any other circumstances, this would send alarm bells ringing. Nevertheless, these sales were attributed to covering tax liabilities. As such, it shows that directors are still relatively confident in the company’s future.

BP

After BP reported record profits last week, many were calling for a windfall tax on the oil giant. Such a tax would hinder future investment by the company as any profits would be heavily taxed, thus limiting its earnings potential. That being said, BP directors were unfazed. CEO and Director Bernard Looney, as well as Julia Emanuele, opted to purchase more shares under the firm’s ShareMatch UK Plan, albeit in small amounts.

The post Director dealings: Lloyds, Rolls-Royce, BP appeared first on The Twelfth Magpie.

More reading

• Is there any value left in Lloyds shares now they’re over £1?
• Back below 500p, is it time to consider BP shares again?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• Here’s how much I think Rolls-Royce shares will be worth by the end of 2027
• Could small modular reactors take Rolls-Royce shares to the next level?

John Choong has no position in any of the shares mentioned at the time of writing. The Motley Fool UK has recommended Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Further, it has allowed the BP (LSE: BP) share price to reach close to 400p, double its lows during the pandemic. Such a high oil price has also led to greater interest in oil stocks. For example, in the US, Warren Buffett has recently opened a position in the US oil giant Occidental Petroleum to profit from the high oil price. Therefore, should I be applying this reasoning to UK oil stocks, and open a position in BP.

Why is Warren Buffett investing in oil?

The simple answer to the question of why Warren Buffett is buying an oil stock is because the price of oil is soaring right now. Even so, I don’t think this fully answers the question. Indeed, Warren Buffett is known for his long-term outlook, and doesn’t invest for short-term profits. He’s also a long-term investor of Chevron, showing that he has favoured oil stocks in the past. 

Using this logic, it seems that Warren Buffett believes that demand for oil will stay strong well into the future. In many ways, this could be true. For instance, there’s a growing population, and the green transition will be a very long process. Provided that oil can stay around $70 per barrel, these oil companies will also be able to provide very strong shareholder returns.

But I’m slightly less convinced, especially as US oil stocks have limited plans for transitioning to green energy. In fact, I believe that the price of oil is unsustainable at its current prices, and a large fall-back is due over the next few years. In this respect, there’s a risk that the BP share price may fall alongside all other oil stocks.

Does the BP share price have further upside potential?

While the BP share price has performed well recently, it has also slightly underperformed other oil stocks, especially those in the US. This is mainly due to BP’s forced disposal of its 19.75% stake in Rosneft, a Russian oil major. This is going to lead to a $25bn hit for the company, alongside hurting profits for the foreseeable future. But I think that positives can be found from this forced divestiture, even though it hasn’t come at a great time. Indeed, Rosneft was a pure oil play, and was inconsistent with BP’s aims to transition into greener energy. For me, such a transition is vital to the firm’s long-term future.

As such, while I’m not following Warren Buffett into oil stocks, due to the potential for the oil price to sink over the next few years, BP does still tempt me. Indeed, the current high price of oil will help it produce healthy profits, while in the long term, the transition to greener energy is well under way. Even so, there are other FTSE 100 stocks that I feel have more long-term potential, so I’ll watch the BP share price from the sidelines for now.

The post Warren Buffett is buying oil stocks! Is the BP share price now far too cheap? appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Just how bad could it get for the BP share price?
• BP shares are falling. But is the oil market actually tighter than investors think?
• How much is needed in a Stocks and Shares ISA for £357 of weekly passive income?
• Oil prices are falling. So why am I still bullish on BP shares?

Stuart Blair has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Recent events

The main news for the company revolves around the upcoming disposal of BP’s 19.75% stake in Rosneft. This disposal was due to the current conflict, and the pressure placed on the oil major by the UK government. However, as previously stated, BP is set to make huge losses on this disposal, as the current Rosneft valuation is far lower than before. Due to a current unwillingness to buy Russian assets, it will also be incredibly hard to dispose of and this may push the price down further. This is what has strained the BP share price over the past couple of weeks.

The decision to pull out of Russia also wipes out around half of BP’s oil and gas reserves, a third of its production and almost $1bn in annual dividends. Especially due to the current high price of oil (and the consequent lost profits for BP), alongside Rosneft’s incredibly low current valuation, this is clearly an unfortunate time to sell the business.

But I still feel it’s the right decision, both from a moral standpoint and for the long-term future of BP. Indeed, Rosneft’s strategy was to continue pumping oil for as long as the demand continued. In contrast, BP has started to pivot away from oil, upping its investment in renewable energy. While the oil price is currently extremely high, I don’t believe this is entirely sustainable. Therefore, for the long-term future of BP, this divestiture may be in the best interests of the group, even if it causes short-term pain.

Is the BP share price too low?

The BP share price is still nearly 30% lower than it was pre-pandemic, even though in 2019, underlying profits totalled $10bn, whereas in 2021, they totalled $12.8bn. This demonstrates that the BP share price may be severely undervalued, and based on profits alone, should be able to return to pre-pandemic prices. This is especially true considering that current high oil prices should boost profitability further.

Due to ambitious renewable energy targets, I also prefer BP to many other oil stocks, which seem far too dependent on just oil. This gives the company a long-term future in my view. But I’m still leaving BP on the sidelines. In the short-term, I worry that the Rosneft disposition may lead to further downside, and in the long-term, I prefer many pure renewable energy stocks.

The post With oil near its all-time high, is the BP share price set to soar? appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Just how bad could it get for the BP share price?
• BP shares are falling. But is the oil market actually tighter than investors think?
• How much is needed in a Stocks and Shares ISA for £357 of weekly passive income?
• Oil prices are falling. So why am I still bullish on BP shares?

Stuart Blair has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The bull case for BP shares

BP released its 2021 full-year results on February 8. The $12.8bn profit figure stood out immediately to investors, and the share price rose over 4% in the days after the release. By comparison, in 2020, BP saw a $5.7bn loss, the latest figure highlighting the turnaround for the firm. It also announced it had reduced net debt for the seventh consecutive quarter. In my eyes, both these factors highlight the managerial strength of the business, which encourages me to buy the shares.

These impressive results helped boost analyst expectations. JP Morgan increased its target from 590p to 600p, with Morgan Stanley also raising its target from 401p to 465p. As mentioned, the current price is just 378p. This gives me confidence that the shares could be a great long-term investment for my portfolio.

Considering the value of its shares, BP is trading on a forward price-to-earnings ratio of 6.6. This seems good value to me, especially considering the recent high profits. Competitors Shell and ExxonMobil are currently trading with 7.7 and 12.3 P/E ratios, respectively. This suggests to me that the current BP share price is undervalued.

BP share price: bear case

An obvious risk I see for BP shares is the global shift towards net zero and increasing ESG concerns among companies. Although BP has made a concerted effort towards cutting emissions, moving forward it’s going to take a huge amount of investment to keep these projects up. The firm already operates with very slim margins, which will come under pressure from outward investment.

In addition to this, the nature of BP’s business is very cyclical. At the moment, commodity prices are soaring, which is great for the business. However, if oil and gas prices crash, the company is in big trouble. This gives it an element of uncertainty in the long term.

BP announced yesterday its plans to divest its 19.75% stake in Russian oil giant Rosneft, following the Russian invasion of Ukraine. This is expected to result in a costly $25bn in exit charges, largely from foreign exchange. Whilst it has insisted this won’t impact any of its long-term strategic and financial targets, it’s definitely a worrying cost.  

The verdict

All things considered, I think that BP shares could be a great addition to my portfolio at its current price. The cheap valuation certainly looks appealing to me, especially considering the encouraging 2021 results. Therefore I would consider buying the shares for my portfolio today.

The post Should I buy BP shares for my portfolio today? appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Just how bad could it get for the BP share price?
• BP shares are falling. But is the oil market actually tighter than investors think?
• How much is needed in a Stocks and Shares ISA for £357 of weekly passive income?
• Oil prices are falling. So why am I still bullish on BP shares?

Dylan Hood has no position in any of the shares mentioned in this article. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Results last year

Due to the rising oil prices, BP was able to report consistently strong results in 2021. Indeed, in the first nine months of the year, it reported an underlying profit of $8.75bn. In the same period of 2020, when oil prices were significantly depressed, it reported a loss of $5.8bn.

There have been other positive signs, such as the reduction of net debt from over $40bn last year, to under $32bn most recently. This has placed the company in a far better financial position.

The higher profits have also allowed greater shareholder returns. The quarterly dividend most recently totalled 5.46 cents per share, a 4% increase on the year. At the current BP share price, this also equates to a healthy yield of nearly 5%. Further, it has continued to announce share repurchase programmes, and in the latest programme it’s aiming to buy back $1.25bn worth of shares. If the price of oil can remain at over $60 per barrel, it also expects to repurchase $1bn of shares for the foreseeable future. Hopefully, this will have a positive effect on the BP share price.

What are the risks?

With all these positives, it may seem slightly odd that BP’s price is still far below pre-pandemic levels. This is mainly due to the uncertainty that faces the company. For example, as seen last year, the price of oil can crash instantly. With the added worries around Omicron, this is certainly something to consider.

Further, many worry that the long-term future of BP is unstable due to climate change issues. This is because, as more people switch to products like electric vehicles, demand for oil may fall. This would have a severely negative effect on BP, despite its heavy investment in greener energy.

There are also fears that the renewable energy sector of the company will not be able to replicate the profits made in the oil division. This may restrict its ability to return a large amount of money to shareholders.

Can the BP share price rise further?

In the short term, I can see the share price rising due to that combination of high oil prices and share repurchase programmes. But I’m more dubious about its long-term future. Issues of climate change may see demand for oil drop, and while BP are investing into greener energy, I don’t believe this investment is sufficient yet. This is because it’s still prioritising shareholder returns, rather than long-term investment into the company. For this reason, I can’t see the share price returning to its former levels, and will be leaving the shares on the sideline.

The post Has the BP share price got long-term upside potential? appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Just how bad could it get for the BP share price?
• BP shares are falling. But is the oil market actually tighter than investors think?
• How much is needed in a Stocks and Shares ISA for £357 of weekly passive income?
• Oil prices are falling. So why am I still bullish on BP shares?

Stuart Blair has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Shell

Despite reduced demand, Shell made over $200bn in revenue in the last 12 months. The Anglo-Dutch company recently announced a $2bn share buyback and made a commitment to invest further in the production of hydrogen fuel and carbon capture technology.

Personally, I’m a big believer in the future of hydrogen. But Shell is producing blue hydrogen, which is made by extracting the hydrogen from natural gas. This is a carbon-heavy process that needs expensive carbon capture facilities to make it viable.

The share buyback also worries me. It’s good for shareholders in the short term, but doesn’t bode well for the future. Prices will fall as the oil and gas shortage ends. Carbon taxes are also certainly going to be implemented at some point in the future. To me, Shell doesn’t seem to be taking the need to change its business seriously enough.

BP

Last year, BP announced a commitment to reduce its oil and gas production by 40%. It plans to do this by investing directly in wind and solar power. In the meantime, BP has also committed to producing more blue hydrogen and developing carbon capture technology. Blue hydrogen makes sense for BP. It has already has invested several billions of dollars into the infrastructure to find, extract, and refine natural gas from its wells around the world. But this shortfall still needs carbon capture technology to catch up if it’s going to be effective. BP has also benefited greatly from the oil and gas shortage, bringing in more than $7bn in the first half of 2021. Unfortunately, this seems to have gone to its head. It has also announced a stock buyback in the region of $1.4bn.

Conclusion

The oil and gas shortage will eventually subside and the COP26 climate summit is less than a month away. US Climate Envoy John Kerry believes that the world is ready to tackle climate change and we can expect some sweeping changes.

Both BP and Shell have managed to build investor confidence by promising to develop low-carbon technologies. But neither of them seems willing to utilise the cash brought in by the gas shortage to achieve this. I think this will harm both companies in the long term, and I won’t be adding either to my portfolio.

The post The oil and gas shortage boosts the Shell and BP share prices. But I won’t be buying appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Just how bad could it get for the BP share price?
• BP shares are falling. But is the oil market actually tighter than investors think?
• How much is needed in a Stocks and Shares ISA for £357 of weekly passive income?
• Oil prices are falling. So why am I still bullish on BP shares?

James Reynolds does not have a position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

BP stock challenges

The pandemic slashed demand for oil. With worldwide travel bans enforced, the price of oil tumbled. Consequently, BP posted a $5.7bn loss for the year, compared to a $10bn profit the year before. This plunged BP stock to a 26-year low and forced the firm to slash over 10,000 jobs. BP Chief Executive, Bernard Looney described 2020 as “the most brutal I can remember in almost 30 years in this industry”. And the pandemic is far from over. Virus variants could mean new restrictions, something continually plaguing the travel industry in the past 18 months. Moving forward this could also place a lid on the growth of BP stock.

A longer-term challenge that BP must overcome is the shift to green energy. It has committed itself to net zero emissions by 2050, which means slashing oil and gas production. It plans to increase its renewable energy portfolio from the current 3.2GW to 50GW by 2030. Although BP could pull this off, I think it will be a tough switch for the firm. Susannah Streeter, a Senior Analyst at Hargreaves Lansdown, described this switch as “walking on a tightrope for the business”.

However, BP is reportedly making good progress towards the target of the sale of $25bn worth of assets by 2025. A $5bn divestment is expected this year. This is helping the firm reduce its net debt position by 20% while moving towards a green energy future. Bolstering the balance sheet and going green should help BP stock in the future

Moving forward

Although the pandemic hit it hard, there have still been some positives for BP. The reduction in the workforce led to its highest margin in 10 years. In addition to this, as my fellow Fool Roland Head pointed out, BP earnings are forecast at $10.5bn for 2021. That would make this the most profitable year since 2013.

BP is currently trading on a forward price-to-earnings (P/E) ratio of 7.5x with a healthy dividend yield of 5.4%.  Competitors ExxonMobil and Valero Energy are currently trading with P/E ratios of 11x and 13.3x respectively. This shows me that BP stock currently offers good value compared to its competition. The large dividend yield also makes BP stock a great income option for me, I believe.

Overall, I think BP stock could be a good addition to my portfolio. Only time will tell if the firm can make the switch to green energy, but I think that current value and encouraging revenue projections for 2021 outweigh this risk.

The post Should I add BP stock to my portfolio today? appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Just how bad could it get for the BP share price?
• BP shares are falling. But is the oil market actually tighter than investors think?
• How much is needed in a Stocks and Shares ISA for £357 of weekly passive income?
• Oil prices are falling. So why am I still bullish on BP shares?

Dylan Hood has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The trading update

For the first half of 2021, BP announced a replacement cost profit of $5.7bn. This compares to an $18.2bn loss last year and reflects the much-improved environment for the oil giant. Indeed, crude oil is now priced at over $70, and this is the underlying reason for BP’s excellent first half.

Net debt was also able to decrease further to $32.7bn, a reduction of around $8bn from the year before. The huge debt pile was one of my major concerns with BP last year, and it is extremely promising to see this being cut. It is also allowing the firm to increase its shareholder returns.

In fact, due to surplus cash flow, BP is going to buy back $1.4bn of its shares in the third quarter. This is an extremely large amount and will hopefully have a positive effect on the BP share price. This is because it increases the ownership stake of all the other shareholders. For the future, it also expects to be able to deliver buybacks of around $1bn per quarter. But this is contingent on the price of crude oil remaining above $60.

In terms of the dividend, this was also increased by 4% from last quarter to 5.46 cents per share, and further 4% increases are expected quarterly. This equates to a high yield of over 5%.

Transition to greener energy

I initially bought BP due to its promises of transitioning to greener energy, and it seems that this is going well. Indeed, it has already built a 21GW renewable pipeline, reached over $10bn of divestment proceeds and bought renewable energy assets in the US, Portugal, Greece and other countries.

Due to the pressing issue of climate change, I feel that this transition into greener energy is essential to the long-term future of oil companies. As such, provided that change occurs at sufficient speed, I believe that the BP share price will be able recover to its pre-pandemic price at some point.

Nonetheless, there are many sceptics with this transition into greener energy. In fact, it will require significant investment, which may reduce the money that can be returned to shareholders. This may be a worry for income investors. Further, BP will still remain heavily dependent on its traditional oil business for many years to come. Declining oil prices will, therefore, have an extremely negative effect on profits.

Can the BP share price rise further?

Although I acknowledge the risks in the long-term future of the firm, I feel that it is still undervalued. This has been reinforced by the recent trading update, which has caused the BP share price to rise around 4% this morning. I believe that there is further to go, and this is the reason why I’m buying more shares.

The post The BP share price climbs after its trading update. Here’s why I’m buying more! appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Just how bad could it get for the BP share price?
• BP shares are falling. But is the oil market actually tighter than investors think?
• How much is needed in a Stocks and Shares ISA for £357 of weekly passive income?
• Oil prices are falling. So why am I still bullish on BP shares?

Stuart Blair owns shares in BP. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The BP (LSE: BP) share price breached the 300p threshold in early trading this morning. A quick read of the oil giant’s latest update on trading explains why. 

Profits up, debt down

Thanks to a bouncing oil price and the disposal of assets, BP achieved a reported profit of $4.7bn over the first quarter of its financial year. That contrasts favourably to the $1.4bn made in the prior three-month period. Unsurprisingly, it also looks far better than the $4.4bn loss seen in Q1 2020. 

Positively, all this cash has allowed BP to dramatically reduce its debt pile. This fell from $38.9bn in December to $33.3bn by the end of March, beating its $35bn target around one year ahead of schedule. Again, this is a dramatic improvement on the $51.4bn at the end of Q1 2020.

According to CEO, Bernard Looney, today’s numbers show that BP is “performing while transforming“. As far as the latter is concerned, the company has been progressing its renewables strategy. This has included building an offshore wind business, buying a stake in Digital Charging Solutions (which produces charging software) and rolling out its new EV charging hubs. Last month, it also announced plans for a blue hydrogen production facility in Teeside. 

Turning a  juggernaut like BP around is easier said than done. However, I’m not sure I’d be complaining about what’s been achieved so far if I were an investor.

And the dividends?

Yes, it’s worth mentioning the income stream.

One of the main reasons for holding BP over the years has been the income it provides. That said, the company was forced to slash its cash payments last year due to the pandemic. Today’s 5.25p per share cash return is identical to that returned in the previous quarter. But it’s lower than the 10.5p per share returned for Q1 2020. 

Nevertheless, BP also announced today that it was commencing a $500m share buyback in Q2. Taking stock out of circulation increases the earnings per share on what’s left over. Theoretically, this should lead to a rise in BP’s share price. Speaking of which…

The bouncing BP share price

Something of an anomaly among UK stocks, the BP share price fell to its lowest ebb later in October 2020 rather than during March’s crash. Since then, however, the stock has increased 57% in value. That’s not as big as the recovery seen elsewhere. However, it’s not too shabby for such a market behemoth.

Despite this rise, the shares still look pretty cheap. A price-to-earning (P/E) ratio of a little under 11 before markets opened suggests I wouldn’t be overpaying if I bought now. 

Risks

Of course, BP is not devoid of risk. The last year has shown just how dependent the company is on something it can’t control, namely the price of ‘black gold’. The pandemic is also far from over and the rush for value stocks could quickly reverse in the event of a significant third wave.

There’s also the opportunity cost of holding the stock. In contrast to some shares, BP will never multi-bag in only a few months. 

Are there better ways of making money in the market? I think so. Notwithstanding this, I’m sure existing holders will be pleased with today’s news. Assuming the economic rebound continues, I think the BP share price will carry on climbing.

The post The BP share price just passed 300p! Here’s why appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Just how bad could it get for the BP share price?
• BP shares are falling. But is the oil market actually tighter than investors think?
• How much is needed in a Stocks and Shares ISA for £357 of weekly passive income?
• Oil prices are falling. So why am I still bullish on BP shares?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

A dividend stock

Aviva (LSE: AV) has bounced back well from the start of the crisis, with the insurance company posting resilient earnings and making some good business moves. For example, it is making good progress in simplifying the business and focusing on its core markets in the UK, Ireland and Canada. This has included the sale of both Aviva Singapore and Aviva Vita in Italy for a combined £2bn. Such simplification of the business will hopefully allow the company to grow profits, in turn increasing long-term shareholder value.

It may also seem ironic to call Aviva a dividend stock, despite the fact that it has cut its dividend by a third. But in comparison to other FTSE 100 stocks, a dividend yield of over 6% is extremely impressive. In addition, although disappointing to shareholders, the dividend cut seems very wise. Firstly, it will allow the insurer to deleverage, which in turn should strengthen the balance sheet. Secondly, it will also allow the group to increase the dividend in the years ahead. These increases are expected to be either low or mid-single-digits each year.

This FTSE 100 stock is still down 45% this year

BP (LSE: BP) is the other stock I think is far too cheap. Although oil prices remain very low, and problems still abound in the industry, BP shares do look set for a recovery. It has also been boosted by news of vaccines, which should help increase demand for oil.

But vaccines are not the only cause for optimism. For example, the third-quarter trading update was fairly positive, as shown by a profit of $100m. Although significantly lower than the $2.2bn last year, this is still a very good result in challenging conditions. Even more impressive was the fact that net debt has fallen to $40.4bn. This is compared to a figure of $46.5bn a year ago. While the gearing ratio is higher than the company will want, I am very encouraged by these figures.

Alongside its transition into greener energy, these recent results increase my confidence for a long-term recovery. Of course, the road to recovery will not be instant, but a dividend of over 6% should help satisfy investors for the short term. I’d therefore snap up this FTSE 100 stock now while it remains under 300p.

The post The Footsie is rising but these FTSE 100 stocks still look cheap to me appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Just how bad could it get for the BP share price?
• A £10,000 ISA buys 1,931 shares in these 6.5%+ yielding dividend stocks!
• 3 top passive income shares to consider with dividend yields above 5%
• How much do you need in a SIPP to target a stunning £750.75 weekly passive income?

Stuart Blair owns shares in Aviva and BP. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.