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Home Stock Analysis I’d like to buy some value BP shares in June, but Aviva’s 6.96% yield is also quite attractive.

I’d like to buy some value BP shares in June, but Aviva’s 6.96% yield is also quite attractive.

by xyonent
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Now seems like a good time to buy BP (LSE: BP) I’m looking to buy shares but there’s one thing stopping me. FTSE 100 Equities are also very attractive, especially insurance companies. Aviva (LSE: AV). You don’t have the cash to buy both. Investing is about making choices. So what do you do?

BP’s share price is volatile. Like other commodity stocks, it tends to rise and fall in cycles. So when Russia invaded Ukraine and energy prices soared, the company’s stock price followed suit.

I’ve resisted the temptation to chase stock price rallies, preferring to buy stocks before they rise rather than after. But that’s not always easy. It involves going against the crowd, which can be a struggle for even the most contrarian investor.

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BP shares are down 4.17% in the past month, and while they’re still up over 12 months, they’re only up 7.69%. I’m not looking to buy at the market’s top.

It could go down further, but that’s a risk I have to take. You have to be pretty lucky to buy at the bottom of the market, and I’m rarely that lucky.

But with the stock trading at 7.1 times earnings, why wait? Today seems like the real opportunity. Brent crude has fallen from over $120 two years ago to a three-month low of $81 a barrel. That seems like enough of a trigger.

The U.S., Brazil and Iran are increasing oil production and supply. Interest rate hikes are overdue and the global economy is slowing, hurting demand. Tensions in the Red Sea have increased shipping costs, but the impact has been less than initially feared. Will these trends reverse? I don’t know. At some point we’ll have to take the plunge.

BP’s current dividend yield of 4.6% is covered by 3.1 times earnings, and is forecast to reach 4.9% in 2024 at a multiple of 2.7 times.

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Now seems like a good time to buy, but the same can be said about Aviva: in contrast to BP, its share price has performed well recently, up 21.74% in the last year.

Chief executive Amanda Brann’s efforts to build a leaner, stronger and more cash-generative Aviva are paying off, with full-year 2023 operating profit rising 9% to £1.47 billion, beating expectations.

Aviva has also bought back £300 million of stock and increased its dividend by 8%. Aviva is expected to achieve an impressive dividend yield of 7.2% next year, dwarfing BP, but its dividend coverage is much thinner at just 1.3 times profits.

Also, Aviva’s £300 million share buyback pales in comparison to BP’s $1.75 billion in the first quarter, which is more than its outrageous $7.91 billion buyback in 2023. Following its strong recent results, Aviva’s shares are trading higher than BP’s at 12.7 times earnings.

If interest rates finally start to fall, stocks could rise further, which should boost asset-management business — though BP would also benefit.

If money were no object, I would buy both and hold for years, maybe decades if I’m lucky. But investing is a choice and I’ve made my choice. I’m already invested in the insurance sector. Legal & General GroupI don’t own any energy stocks. I’ll be looking to buy BP in June. Then back to Aviva.

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