BP plc (ADR)(BP): Should You Buy The Stock Today?

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October 12, 2015 12:33pm ETF BASIC NEWS

buy-and-holdAlex McGuire:  The BP Plc. (NYSEADR:BP) stock price today (Tuesday) jumped 2.3% to $34.23 despite the fact that the U.S. Department of Justice announced BP will pay a $20.8 billion settlement for causing the 2010 Deepwater Horizon oil spill.


Yesterday, the DOJ issued a record $20.8 billion fine to settle the damages. The settlement resolves all claims against BP charged by the DOJ and five states bordering the Gulf.

The disaster is considered the worst oil spill in U.S. history.

It occurred when a BP-owned oil rig exploded in the Gulf of Mexico and leaked 4.9 million barrels of oil over the course of five months.

The spill killed 11 people and devastated the marine ecosystem in the area.

bp stock

“It’s the largest settlement with a single entity in American history,” said U.S. Attorney General Loretta Lynch in a statement. “Once approved by the court, this agreement will launch one of the largest environmental restoration efforts the world has ever seen.”

The BP stock price has soared recently. The oil giant is up 11.5% since Sept. 1 and has climbed 15.5% over the last week alone.

The rally in the BP stock price today comes alongside a rally in oil pricesWTI crude oil prices are up 2.3% today and trading at $47.32 a barrel. The U.S. benchmark is up 4.7% since Sept. 30.

With all of this in mind, investors want to know if they should invest in BP stock…

Should You Buy the BP Stock Price Today at $34.23?

BP stock is a good interim investment to have while oil prices gradually rebound through the end of 2015. That means it’s a healthy stock to buy if you’re looking for dividends until oil prices fully stabilize. BP boasts a yield of 6.97%, which is 4% higher than the average yield of all Dow Jones Industrial Average stocks.

“While the turnaround in oil stock fortunes might be delayed, a solid ‘play’ in the interim would be to focus on stocks with secure dividends to boost returns until they inevitably rally,”Money Morning‘s Global Energy Strategist Dr. Kent Moors explained. “BP Plc. regularly pays dividends and could bridge the gap while its discounted stock price rebounds.”

Moors says short-term price volatility should be expected. However, oil prices are set to follow a “ratcheting” upward trajectory over the long term.

You see, many factors can depress the cost of oil since it’s measured in U.S. dollars. They include a potential interest rate hike and the overall strength of the dollar. These influences can cause knee-jerk downward reactions in prices.

But crude oil prices will gradually rise thanks to a dwindling U.S. rig count, decreasing supply, and increasing demand.

“One thing is clear,” Moors said. “The ratcheting effect I have been talking about – in which oil has an overall trajectory in one direction (in this case up) despite volatility in the other – is taking shape.”

The Bottom Line: The BP stock price today is surging despite the fact that the company will pay more than $20 billion for its deadly oil spill. But don’t invest in BP stock if you’re hungry for explosive short-term gains.

We recommend buying shares of the oil giant if you’re looking for a long-term energy play with a strong dividend.

Money MorningWritten By Alex McGuire From Money Morning

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