Jul 30 2008
Shopping like crazy
There are some days when I have to sit on the money in my money market because I can’t find a thing that I feel is a good buy. Then there are days like today: I don’t have enough money to buy everything I want!
The bargain of the week is British Petroleum Prudhoe Bay Royalty Trust.(BPT.) It just paid a dividend and has dropped down to a reasonable price. The P/E is under 10, and the price of oil is correcting right now. The dividend yield is 9.92% at today’s close, and that’s close enough to a double digit for me! The risk is not whether or not the stock price will someday rise. The risk is whether or not there will be a further drop in the share price until it rebounds when oil goes back up.
I like BP for multiple reasons. First, it was quickly responsive for the oil leak on the pipeline recently. The company has fixed those problems and moved on. Second, BP has dedicated a great deal of time and energy to renewable energy sources. That’s just smart business, and gives great hope for the future. That kind of innovation reminds me of the contrast between Toyota’s invention of the Prius, and GM and Ford’s developing ”hybrid” that used both E-85 and regular gas. GM and Ford’s car bound customers to using fossil fuels. BP is like Toyota, prescient in its understanding of the importance of developing alternative energy, especially wind and solar technologies.
You’ll have about a three month wait until the next dividend. And if I have any complaint at all, it’s that the dividend is not stable. Zachs reported that this most recent one was over 11%, but list of dividends on Morningstar is all over the place. Just keep this thought in mind: you would be investing in a stock that will give you a decent dividend and increase in value when the price of oil rises again. Capital growth and dividends. Very nice.
Just to let you know, I don’t usually commit more than 35% of my regular portfolio to high yield dividend stocks. But since the stock market has been falling, and commodities taking a correction, high yield dividends are the most stable assets you can have.
