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According to AJ Bell‘s latest buying activity, BP (LSE:BP.) shares continue to be a popular investment in Britain. And with the oil & gas giant offering an impressive 6% dividend yield, it isn’t hard to see why. That’s almost double the payout of the FTSE 100 in 2025, creating what seems to be a highly lucrative passive income opportunity.
So how many BP shares do investors need to buy to start earning an extra £1,000 each month? And is this actually a good idea?
Crunching the numbers
According to the latest analyst forecasts, BP shareholders are on track to receive an estimated $0.32 in dividends per share in 2025. Converting that back into sterling at the current exchange rate translates to around 24p. And therefore, to earn £1,000 a month, or rather £12,000 a year in dividends, investors will need to buy roughly 50,000 shares.
At the current stock price, that will set someone back by around £204,000 – a pretty large lump sum that most investors don’t tend to have lying around.
But given sufficient time, consistently allocating a bit of capital each month to BP shares as well as reinvesting any dividends received along the way, could eventually let investors achieve this goal. And that seems to be the strategy for many investors using AJ Bell’s platform, since the stock was responsible for 3.4% of all buying activity last month.
Risk versus reward
BP shares suffered through some sharp volatility earlier this year, following the initial announcement of US tariffs that spooked the markets. Since then, the energy stock’s steadily started to recover, suggesting that investors believe the initial sell-off was overblown, creating potentially both a value and income opportunity. And to be fair, there are some valid reasons to be optimistic.
Management’s pivoting back towards fossil fuels versus renewables, opening the door to more predictable and lower-cost cash flows. This change in direction has also helped reduce pressure from activist investors and started a $20bn disposal programme to significantly reduce debt and bolster operational efficiency.
So far, the early results have been encouraging. And with the stock trading at a relatively undemanding underlying price-to-earnings ratio, it’s not hard to see why BP shares are popular among dividend investors.
Having said that, there’s no guarantee the company will ultimately live up to expectations. Doubling down on fossil fuels increases the group’s exposure to commodity price fluctuations. So if oil & gas prices stumble, BP’s earnings and, in turn, dividends, might follow.
Similarly, management’s turnaround strategy also introduces execution risk. Selling off a large chunk of assets appears to be crucial to getting the debt burden back under control. Yet, if executed poorly, operational disruptions or delays may follow, allowing elevated interest expenses to continue chipping away at earnings.
The bottom line
Both BP’s dividend yield and share price look fairly attractive right now. But that’s ultimately a reflection of the risk and uncertainty of management’s plan to steer the business back on track after falling behind its main competitors. And as things stand, it’s simply too early to tell. With that in mind, I’m not rushing to add BP shares to my portfolio right now.
