BP rose 0.5 percent to the highest level since July 25 and Shell reached the highest since 2005 before slipping back. Oil held near an almost eight-month high after yesterday surging by 4 percent on speculation tension between Iran and the West will tighten supply. Price gains may bolster cash flows and allow bigger producers to boost payouts to shareholders this year.
“We’re still flying high from oil price movements,” said Peter Hutton, an analyst at RBC Capital Markets in London. The largest oil producers “provide a reliable base for investors. They offer solid yields and decent growth,” he said.
BP’s dividend yield, or the annual payout as a percentage of the current share price, is about 4.2 percent and Shell’s is 3.3 percent, according to data compiled by Bloomberg. Ten-year U.K. government bonds yield about 2 percent in comparison.
BP, operator of the Macondo well in the Gulf of Mexico that caused the biggest U.S. oil spill, begins a court case in the U.S. in February that will apportion liability. The company cut its dividend in half after the disaster and has said it will increase the level again in line with improved performance.
“If the oil price holds where it is, there’s a very good chance that you get higher dividends,” said Stuart Joyner, an analyst at Investec Securities in London. “We see generalized, institutional buying. If people are looking to pick up some cheap dividend-yielding stocks, both BP and Shell fit.”
The FTSE 100 index of U.K. shares fell 0.6 percent.
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