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Citi lifts BP target price, sees soft signals on dividend increase
Analysts at Citi lifted their target price on shares of BP by 6% to 510p, while reiterating their 'neutral' recommendation on the shares, highlighting the "soft signals" of a rise in the dividend emanating from the company.
The latter, they said, should come as some comfort for shareholders following 14 straight quarters with an unchanged payout.
The drivers of their higher discounted cash flow-based target price were the company's updated guidance on tax, costs and depreciation from the day before.
Furthermore, over the medium-term the outfit's cash returns, at 4.2%, should catch-up with those of its peers.
"Cash returns (CROCI) of 4.2% still lag peers by 170 bps, but delivery on forward plans should see BP catch up by 2020," they explained.
Indeed, the latest set of annual results had revealed the strongest year-on-year rate of improvement in BP's operating cash flows.
"The debate, if there is one on BP, is as the business improves to a point of generating post- dividend free cash flow, does that money go back to shareholders? Forward capex guidance looks to imbed a lot of sustained efficiency."