BP Prudhoe Bay Royalty Trust: A Solid Dividend Play

Posted Jan 13th 2011 2:30PM by Joseph Lazzaro
Filed under: Stocks to Buy

For a dividend play supreme, BP Prudhoe Bay Royalty Trust (BPT), first discussed here on March 26, 2010, at a price of $93.90, certainly is generating an impressive capital gain for investors.

BPT shares have soared to about $126 from $105 in the past three months -- a gain that would tempt some to take profits. Even so, this dividend play extraordinaire is worth retaining, for royalty reasons.

The trust distributes royalties on 16.4% of the first 90,000 barrels per day (bpd) of average daily production per quarter from BP's share of the Prudhoe Bay oil field.

The current annual dividend is $9.99 per share, good for an impressive 12.8% yield at the current trust price. BPT fell $1.30 to $126.19 in mid-day Thursday trading.

The past three months notwithstanding, investors should not expect an outsized capital gain with BPT: a 5% to 7% annual stock appreciation is the realistic forecast, but shares could just as easily retreat 5% during that period. BPT is a decidedly dividend-based play, hence don't consider BPT if your emphasis is capital gain.

BPT's 1-year stock range is $79.56 to $131.49, and the 5-year stock range is $50 to $131.49.

Stock Analysis: I consider BP Prudhoe Bay Royalty Trust to be a low-risk stock. Consider BPT if you're looking primarily for a dividend, not a capital gain. I'd put a sell/stop loss at $45.

Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

Tags: BP Prudhoe Bay Royalty Trust, BPT, dividend stocks, featured

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Reader Comments (Page 1 of 1)

1-14-2011 @ 9:09AM

Blackbrit said...

Hi, thanks for the article.

I own a few BPT shares already, and agree they are a solid "hold" (given the recent rise, as you mention, I wouldn't necessarily advise buying more at this point in time). However. I don't understand why you say that the dividend yield is currently about 12.8%. The annual dividend is $9.9, which - divided by the current share price of$126, and multiplied by 100 - appears to be about 7.9% ... is there a misprint in your article, or have I misunderstood something?

Many thanks again

Blackbrit

1-14-2011 @ 9:32AM

priapism said...

^^Agreed with the above comment. Also, the dividend is quoted as 8.79 on Reuters, not $9.9. Something doesn't add up...

1-14-2011 @ 8:21PM

kenbookie said...

If I HAD bought it today at $126 or even in March 2010 at $94 , I would put a stop loss in WAY before $45. I actually bought it in early 2009 at around $74 and have a stop loss at $100.