BP Is A Great Value Stock Offering 5% Dividend Yield In The Large-Cap Energy Space

Online, December 6, 2012 (Newswire.com) - The EPA has banned BP plc (BP) from obtaining new contracts in the United States. However, the settlement that the company and the Department of Justice have reached with regard to the Mocando incident will help the company in lifting the ban imposed on it. BP showed an upside of 5% after it announced the settlement of the Gulf of Mexico oil spill event. The company has decided to pay $4 billion to the Department of Justice to lift the criminal charges against it. BP has also decided to pay $525 million to settle the charges with the SEC. In order to retain its profitability position going forward, the company will pay these fines in next three to five years. In our opinion, these settlements would enable the company to revitalize its market position in the eyes of environmentally friendly investors. We believe the company would adopt a more cautious approach in its drilling activities to avoid penalties in the future.

The company's restructuring efforts and its investment plans with regard to its upstream business, along with the considerable expected increase in its production, are key indicators for long-term investors. Moreover, the stock is attractive to investors due to its cheap valuations. It is trading at a forward price-to-earnings of 7.9 times, at a discount when compared with the industry average of 8.9 times.

BP is the best value stock among large-cap oil and gas companies. It is currently trading at a forward P/E of eight times, which is at a discount when compared to forward price-to-earnings of 11.13 times of its competitor Exxon Mobil (XOM).

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