BP (BP) stock has declined slightly over the last 3 months while the S&P 500 as a whole as gained 5.6%. As a result, the stock appears attractively valued and is now offering a 5.5% dividend yield.

BP is headquartered in the United Kingdom, making it an international stock.  If it were a US based company, it would be among the highest yielding members of the S&P 500.  As a European stock, however, BP is not a member of the S&P 500.

While most American investors do not have this European oil major on their radar, they are likely to be well served if they purchase it at its current price.

There are three reasons that the vast majority of American investors stays away from BP. First of all, most investors are more familiar with the domestic oil majors, Exxon Mobil (XOM) and Chevron (CVX), and thus they prefer these stocks. In addition, these two companies have exceptional dividend growth records, as they have raised their dividends for more than 30 consecutive years. These records are in sharp contrast to that of BP, which was forced to suspend its dividend after its major accident in the Gulf of Mexico, in 2010.

That accident is another reason for the aversion of domestic investors to the European oil giant. That accident, which is the worst in the history of the oil sector, has cost BP about $62 B so far. This amount is obviously excessive, particularly if one notes that the oil major has posted earnings of $7.0 B in the last 12 months. Another consequence of that accident was the unprecedented scale of asset sales, which BP implemented in order to pay for its liabilities. Due to those asset sales, the oil production of BP decreased approximately 25%, from about 4.0 M barrels/day to 3.0 M barrels/day.

When BP began to somewhat recover from the disaster in Macondo, it faced another strong headwind, namely the plunge of the oil price that began in 2014. However, investors should realize that the company has finally entered a sustained recovery phase. Due to the production cuts of OPEC and Russia, the oil market has become much tighter lately and hence the oil price has enjoyed a strong rally in the last 12 months. Thus it is now trading near a 3.5-year high.

Moreover, BP has begun to grow its output aggressively once again thanks to its investments in high-quality, low-cost reserves in recent years. The oil major grew its output by 10% last year and expects to grow it by 5% per year for the next four years. It launched 7 major oil and gas fields last year, more than in any other year in its history, while it also expects to start another 6 major projects this year. In this way, the company expects to restore its output to 4.0 M barrels/day, the same as before its major accident.

Furthermore, investors should not underestimate the dividend of BP. The oil major has proven that it is extremely shareholder-friendly even under the worst conditions. It was forced to suspend its dividend after its accident due to the uncertainty over the actual amount of liabilities and the public rage but it resumed paying dividends just three quarters after the accident. Moreover, during the downturn of the oil market that began in 2014, BP froze its dividend for 15 consecutive quarters. Nevertheless, it was a markedly generous dividend, which resulted in a yield of up to 9.0% when the stock posted a bottom. In the running quarter, BP raised its dividend by 2.5% and thus it currently offers a 5.5% yield. This is certainly an attractive yield, particularly given that the company is not likely to cut its dividend even under the worst business conditions.

To conclude, BP has gone through fierce headwinds since 2010 but it has finally entered a sustained recovery phase. It has promising growth prospects and is likely to benefit from the strength of the oil price for the foreseeable future. Thanks to the recent correction of the stock, investors can purchase it at a 5.5% yield and at an attractive valuation, as the stock is trading at a current P/E ratio of 13.2. Overall, those who purchase BP at its current price are likely to be highly rewarded by its growth prospects, its attractive valuation and its generous dividend yield.