6.5% annual yield as of April 2012 Here is BP’s dividend forecast until 2026

BP (LSE:BP) shares are back in high demand as oil prices rise again. At 429p per share, i FTSE 100 The fossil fuel giant is up 6.4% year to date through 2025, and is the most bought share in the UK or US in Hargreaves Lansdowne investors in the past seven days.

Yet despite BP’s rising share price, it still has a much higher dividend yield than many other Footsie companies.

At 6.3%, the driller’s dividend yield to 2025 rises above the blue-chip average of 3.6%. And next year the yield reaches 6.5%.

However, consumer earnings and equity forecasts have been known to sometimes miss their marks, both positively and negatively. So how accurate are the current BP dividend forecasts? And should I consider buying an FTSE company for my portfolio?

Good

It is important to remember that benefits are never guaranteed. And that sometimes a very big problem comes and it can destroy the payment policy of the company.

After the outbreak of Covid-19 in 2020, BP reduced the annual dividend not once but twice. I mean A shell – which has not reduced shareholder rewards at any time since the Second World War – has taken a turn for the worse.

Despite another catastrophic event, BP looks well positioned to meet dealer forecasts based on potential earnings.

In 2025 and 2026, the forecasted dividends are covered 1.9 times and 2.1 times by expected earnings. Both figures are in and around the 2-time safety benchmark that investors are most interested in.

Bad

However, a look at BP’s balance sheet paints a picture that isn’t promising dividend-chasing.

While cash flow remains strong, the business is struggling to manage its debt pile. Net Debt rose another $1.9bn a year to reach $24.3bn as of September 2024.

This partly reflects the high capital expenditure required for oil exploration, development and production. BP spent $12.5bn in the nine months to September, and costs are likely to remain at these levels until the end of the decade at least.

These debts are currently in effect, as evidenced by BP’s willingness to pay dividends above the market and launch further share buybacks. However, this could change very quickly if oil prices weaken and the company’s profits come under pressure.

The bad?

While crude prices are rising today, the outlook for the rest of 2025 – let alone 2026 – is subject to confirmation. Increased non-OPEC supply and weak Chinese demand both pose a continuing threat to crude prices. The potential rollback of OPEC+ production cuts also continues to grow.

As a long-term investor, I’m just not worried about BP’s share prospects over the next two years. I’m also concerned about the oil giant’s ability to continue paying huge dividends as demand for renewable energy steadily increases and sales of electric vehicles rise.

The FTSE 100 is full of stocks with high dividend yields. Given BP’s uncertain earnings trajectory and debt-heavy balance sheet, I’d better pick some other income stocks to consider.