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BP dividend rise boosts income funds

The increase is the first since the oil major reinstated payouts to investors in February 2011.

By Mark Smith, Reporter, FE Trustnet Follow
Tuesday February 07, 2012

Many income investors received an extra boost this morning as stock market favourite BP announced a 14 per cent hike in its dividend, triggered by a rise in net earnings.

The oil giant reported profits of $23.9bn in 2011 compared with a loss of $4.9bn in 2010. The move marks the first dividend rise since the payouts were reinstated in February 2011, following their suspension after the Gulf of Mexico oil spill in 2010.

Analysts expect 2012 to be a bumper year for dividend growth because companies have shored up balance sheets and cash levels following the 2008 credit crunch. Earlier this week Hargreaves Lansdown said special dividends, such as those paid out to Vodafone shareholders last month, would be a growing theme for the year.

M&G Recovery
, Newton Global Higher Income and Artemis Income are among the largest funds with a significant exposure to the oil major. According to data from FE Analytics the funds have 6.4 per cent, 6.3 per cent and 4.7 per cent of assets invested in BP respectively.

Artemis Income, which appears at the core of many investors’ portfolios, has returned 108 per cent over the last decade compared with 72 per cent from the average UK Equity Income fund. More than 414 funds in the IMA universe have exposure to BP, with 15 investing more than 8 per cent of their assets in the company. Scottish Widows’ £187m HIFML Special Situations fund, the £200m Halifax Special Situations fund and Fidelity’s £441m UK Growth fund have the highest exposure to the company.

Performance of funds with the highest weighting to BP

5-yr returns (%)
3-yr returns (%)
Weighting to BP (%)
Halifax Special Situations
Scot Wid HIFML Special Situations
Fidelity UK Growth
Investec UK Alpha
Reliance British Life
TU British
Henderson UK Alpha
Majedie UK Focus
Smith & Williamson UK Equity Growth
Scot Wid HIFML UK Strategic

Source: FE Analytics

Graham Spooner, investment adviser at The Share Centre, says the company’s turnaround from the Deepwater Horizon disaster is encouraging.

"BP is heading down the right road to being a big dividend payer again," he said. "Shell has taken over in that respect but with BP on a significant discount people may see this as a good long-term bet."

"The chief executive has also announced plans to increase levels of cash significantly by 2014, which could pave the way for further dividend increases or share buy-backs."

BP’s profits have also been boosted by the relatively high price of oil, which has been at about $100 a barrel for much of 2011.

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Theo Feb 07th, 2012 at 08:43 PM

Ok, PB is rasing its dividend. So, what dividend is forecast for this year and how will BP compare with Shell as an investment?


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Data provided by FE. Care has been taken to ensure that the information is correct, but FE neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.

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