Why I'd buy BP plc and Unilever plc for their dividends and growth potential

There was a period when many wouldn't even consider investing in oil titan BP(LSE: BP). The fallout from the Deepwater Horizon spill coupled with a dividend built on shaky foundations suggested that the share was too risky for those looking for decent, dependable income from their holdings. Taking into account last week's full-year figures and the resurgent oil price, however, I'm beginning to think that now might be a great time to buy a slice of the company.

On Tuesday, CEO Bob Dudley heralded what he regarded as "one of the strongest years in BP's recent history" with annual profits more than doubling to $6.2bn, from the $2.6bn achieved in 2016. Production also rose to 2.47m barrels of oil a day -- a 12% increase on the previous year.

Having begun the second year of its five-year plan "with real momentum", the £96bn-cap is now "increasingly confident" that it can continue to grow while also improving shareholder returns. As an indication of the former, the company recently announced its intention to increase production at its North Sea operations to 200,000 barrels by 2020.

The fact that BP has benefitted from the sustained rise in the price of oil should also mean that payouts are safe for now. From July to early January, the price of a barrel of the black stuff climbed 66% to $70. Although there is no guarantee that this will be higher by the end of 2018 (it's actually fallen back to $60 over the last few days as a result of market volatility and concerns over rising US output), anything above BP's break-even price of $50 bodes well for the company's ability to cover its rewards to shareholders -- something that hasn't always been the case.

At a forecast 5.9% for this year based on its current share price, the yield is also well over three times better than the 1.35% currently being offered by even the best easy-access cash savings account.

With shares already 10% lower in price than they were in mid-January, thanks to the correction in global markets, I think BP could be a decent buy for the medium-to-long term.

Historically cheap

Based on recent results, its enviable portfolio of brands and a tempting valuation, consumer goods giant Unilever(LSE: ULVR) is another stock I'd be tempted to snap up right now.

At the start of February, the FTSE 100 constituent delivered an encouraging set of full-year numbers, suggesting that actions taken by management since last year's takeover approach from Kraft Heinz were beginning to bear fruit.

To recap, Unilever recorded underlying sales growth (excluding spreads) of 3.5% and a rise in underlying operating margin. Net profit increased just under 17% to £6.5bn, with free cash flow soaring from £0.6bn to £5.4bn by the end of the reporting period.

Looking ahead, CEO Paul Polman expects that the company's strategy for 2018 will generate "another year of underlying sales growth in the 3% to 5% range, and an improvement in underlying operating margin and cash flow".

Right now, you can pick up Unilever's shares for around 18 times predicted earnings for the current financial year. While unlikely to tempt hardline value investors, it's worth pointing out that the stock is rarely this cheap to acquire. With a forecast 3.6% dividend yield and a long history of consistently hiking payouts, Unilever could also be regarded as a great income play.

Five of the best

With global markets declining as investors panic over the prospect of a quicker-than-expected rise in interest rates, it makes sense to gravitate to those companies that have consistently demonstrated their ability to continue growing revenues and profits even during difficult times.

That's why the Fool's analysts have produced a special report detailing five superstocks that most investors could quite reasonably buy and hold for retirement. Funnily enough, the aforementioned Unilever makes the grade. To discover the identity of the other four, just click here. The report is completely FREE to read and comes with absolutely no obligation.

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended BP. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.