After Earnings, Is BP plc (ADR) (BP) Finally on its Way Back to Health?

I couldn’t blame any Fools for feeling that way, and as a result, I’d offer French oil major Total SA (ADR) (NYSE:TOT) as an alternative among European energy stocks. Total SA (ADR) (NYSE:TOT) is a $120 billion stock by market capitalization and affords investors the same international diversification benefits, without the added stress of the oil spill.

Total SA (ADR) (NYSE:TOT) reported first-quarter adjusted net income fell 6% in U.S. dollars year-over-year, to $3.8 billion, but the company is in a much less precarious position than rival BP. Total uses much of its cash flow to pay a generous dividend to shareholders. The company’s last four quarterly dividend payments add up to a 5.7% annualized yield.

On the topic of dividends, however, is where investors should feel good about owning BP. Shortly after the oil spill, BP was forced to suspend its dividend. When it resumed dividend payments, the company set distributions at half the level prior to the spill.

Since then, BP plc (ADR) (NYSE:BP) has grown its dividend at rates that far exceed the dividend growth of most other large-cap oil majors. Last year, BP raised its dividend by 13%, after a 15% boost the year before.

And, while it might seem absurd, BP’s share price may represent a value opportunity. First, let me fully acknowledge that $42 billion in legal costs is a gigantic number. Now that we have that established, let’s also recognize that shares of BP are still $18 per share lower than they were pre-spill.

That means that BP has lost $55 billion in market value based on its 3.1 billion shares outstanding. As a result, it seems that the market may be overreacting to what BP is likely to pay in total damages.

In addition, BP plc (ADR) (NYSE:BP)’s dividend yield sits at 5.1%, meaning shareholders are at least paid well to wait for the company to get past the lasting effects from the spill. There are clearly plenty of alternatives within the energy sector for investors to choose from, but for those who don’t mind taking the risk, BP could be a real long-term winner for patient investors.

The article After Earnings, Is BP Finally on its Way Back to Health? originally appeared on Fool.com and is written by Robert Ciura.

Robert Ciura owns shares of BP p.l.c. (ADR). The Motley Fool recommends Total SA. (ADR). The Motley Fool owns shares of Transocean. Robert is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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