BP had to suspend its dividend in the oil spill aftermath and then brought it back at a lower rate. BP had been far and away the biggest dividend payer among the Big Oil stocks and, at a 3.6% forward yield currently, is still well above the rate paid by Exxon Mobil ( XOM), which is at 2%. Some analysts are hoping that BP has on its mind some cash rewards for shareholders who have been patient through the oil spill years. "I don't know if people have expectations, but I'm interested," said Raymond James analyst Stacy Hudson. "I tend to think the view is toward raising the dividend," said Phil Weiss, analyst at Argus Research.
An issue tied up with any increased, shareholder reward, though, is BP's ongoing effort to sell two of its U.S. refineries, Texas City and Carson. It has not been a good market for refinery sales and it has already taken BP longer than originally thought to sell the two refiners. Raymond James' Hudson added, "Selling a refinery in the U.S. is not too easy right now." Valero ( VLO) is on record as being interested in Texas City but said on its recent earnings call that it can't talk about a deal given confidentiality agreements associated with bids. The company also remarked on a lack of any action in the bidding process. "An increased dividend may come out in conjunction with the refinery sales," said Weiss of Argus Research. A deal would "free up billions for BP," said Fadel Gheit, Oppenheimer & Co. energy analyst. Gheit, though, believes it's wishful thinking to bet on an immediate dividend, given the refinery sales outlook and more specifically, his belief that it's not necessary right now. "There's no urgency. The dividend is plenty high," Gheit said. For the Oppenheimer analyst, the longer-term upside is the reason to buy BP. Gheit has a $55 price target on BP and cited three reasons why the stock should rise, though over a year to 18 months, as opposed to on earnings specifically:
In recent weeks, the judge handling the BP oil spill case in New Orleans issued two rulings that were favorable for Halliburton ( HAL) and Transocean ( RIG) in terms of honoring indemnity these companies have from contracts with BP. Yet BP has trended up alongside these companies, as opposed to being judged by the market as a loser in the wake of these court decisions. The bottom line is that the market expects Halliburton and Transocean to still strike deals with BP, and the prevailing wisdom is that the deals will be reached before Feb. 27, when the court case is supposed to begin. If Halliburton and Transocean were given a little leverage by the court in the recent decisions, it didn't change the prevailing view that they still prefer to settle out of court with BP.
Eric Rosenbaum. >To follow the writer on Twitter, go to Eric Rosenbaum. Follow TheStreet on Twitter and become a fan on Facebook.