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Why Is BP p.l.c. (NYSE:BP) Among the Best FTSE Dividend Stocks to Buy Now?
We recently compiled a list of the 10 Best FTSE Dividend Stocks To Buy Now.In this article, we are going to take a look at where BP p.l.c. (NYSE:BP) stands against the other FTSE dividend stocks.
Goldman Sachs Research predicts moderate growth for the UK economy in 2025, with GDP rising 1.2%. That is slightly below the Bank of England's (BoE) 1.5% projection and the 1.3% consensus among economists. Moreover, growth is expected to slow as the year goes on, driven by trade uncertainties, tighter budgets, and changes in housing policies. However, inflation is likely to ease through 2025, which could lead to bigger interest rate cuts than the market expects. While most think the BoE will stop cutting rates at 4%, Goldman Sachs sees rates dropping further to 3.25% by mid-2026.
Building on this cautious economic outlook, fiscal policies are also expected to play a significant role in shaping growth. The UK’s autumn budget provided a near-term boost to demand but points to a consolidation in 2025, likely slowing growth later in the year. Inflationary pressures from public sector pay deals and higher taxes on services are expected to persist in the short term but should ease as wage growth slows and labor market tightness lessens.
Amid these broader economic challenges, UK investors may find some optimism in corporate dividends. AJ Bell's latest Dividend Dashboard paints a positive picture for FTSE 100 dividends. Analysts expect payouts to grow by 1% in 2024 to £78.6 billion, followed by a 7% bump in 2025 to £83.9 billion, though still just shy of the 2018 record of £85.2 billion. This strong performance in dividends highlights a contrast to the broader economic challenges, offering a silver lining for investors. Share buybacks remain strong, with £49.9 billion already planned for 2024, on top of £52 billion last year. Combined with £11 billion in expected dividends from the FTSE 250 and £47.2 billion in takeovers, the FTSE 350 is set to deliver a whopping £189.7 billion in total cash returns. That works out to a cash yield of 7.7%, comfortably beating the Bank of England’s 5% base rate, the 3.92% 10-year gilt yield, and the 2.2% inflation rate.
Nevertheless, domestic companies are still grappling with significant headwinds, such as rising costs like National Insurance and minimum wage, all while operating in a sluggish economy. Investors are still favoring the US market, but falling interest rates could nudge some back toward UK stocks. Meanwhile, rising bond yields and pension plans shifting to UK equities might help stocks but could drive up government borrowing costs by reducing demand for gilts.
Our Methodology
For this article, we used the iShares Core FTSE 100 UCITS ETF. The fund aims to replicate the performance of an index comprising the 100 largest companies in the UK. From this fund, we focused on picking prominent stocks with stable yields and strong dividend policies. The list below is ranked in the ascending order of dividend yield as of January 3.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here)
A large turbine generating power from natural gas, smoke rising in the background.
BP p.l.c. (NYSE:BP) provides carbon products and services across different sectors. The company is involved in producing natural gas, trading gas, and running wind power projects, hydrogen, and carbon capture facilities. BP p.l.c. (NYSE:BP) also trades renewable and non-renewable power, produces crude oil, and is active in retail fuel, EV charging, Castrol lubricants, aviation, B2B, and midstream businesses. Founded in 1908, BP p.l.c. (NYSE:BP) is headquartered in London. It is one of the best FTSE dividend stocks to watch out for.
BP p.l.c. (NYSE:BP) announced on January 2, 2025, that it has successfully started gas production from the GTA Phase 1 project, one of Africa's deepest and most complex gas developments. The LNG project, located offshore Mauritania and Senegal, is expected to produce 2.3 million tonnes annually, helping meet global energy needs. Once fully operational, GTA Phase 1 will contribute significantly to the LNG market.
Year-to-date, BP p.l.c. (NYSE:BP)’s upstream production is up 3%, with a 5% increase in liquids production. BP’s plant and refining reliability were strong, at over 95% and 96%, respectively. In EV charging, the company saw 80% growth and sold 1 terawatt hour of electricity globally. BP p.l.c. (NYSE:BP) also has 23,000 barrels per day of biogas supply and expects to save over $0.5 billion in costs by 2025. Financially, the company announced a $1.75 billion share buyback and a $0.08 dividend per share. BP is exploring resources in Iraq, Azerbaijan, and Abu Dhabi, and the company also completed deals with Bunge and Lightsource bp.
Among the hedge funds tracked by Insider Monkey, BP p.l.c. (NYSE:BP) was found in 36 public stock portfolios, compared to 38 in the last quarter. Arrowstreet Capital is one of the top position holders in the company, with 5.2 million shares valued at $221.5 million.
Overall BP ranks 4th on our list of the best FTSE dividend stocks to buy now. While we acknowledge the potential of BP as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than BP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
