Bought 175 shares of British petroleum (BP) for 3,3€. Total cost – 587€. Annual post-tax dividend inome – 62 EUR. Yield on cost – 10,6%(!!!).
As you know the market is a bloodbath lately due to coronavirus and a great buying opportunity. Still sad about Lesson learned – stick to your strategy. And there was one particular sector that received double hit – oil sector. Sad is that my latest purchases was dedicated there. Today I could have had x2 of them shares. Either way that’s life. I still think that major oils will do ok in L/T perspective. Yes oil is down to 30$ and none of major companies can pay their current dividends. But buying opportunity was just to great so I decided to put some aditional capital in one of them. So made small peer comparison, which company has most of cash reserve: RDSA – 3bn$, BP – 23 bn$, XOM – 3 bn$. And the winner is clear.
British petroleum (BP) – this company has massive cash reserve of 23 bn$. Yes some of that is related to oil spill in Mexico, but this will cost only ~1bn$ in 2020. As company pay 6,7 bn$ of dividends they can pay same dividends form cash reserve form 3,5y earning zero. And we are talking about double digit post-tax dividend yield! <600 EUR investment bringing >60 EUR dividends. So I think BP dividends are safe. They can easy survive one year of loss making. In such situations liquidity is the main thing. We can stop calculating P/E, Debt/EBITDA ratios based on y2019 financial results as they are obsolete now, so BP has the best liquidity situation.
Never the less stay safe everyone. We are in uncharted territory with corona virus. Hopefully all will be ok and spring will solve this thing.