01-12-2015, 04:56 AM
(01-11-2015, 08:05 PM)hendi_alex Wrote: The thing about that comparison is that there is a high probability of a dividend cut from BP. The current dividend was based upon BP being a much larger company. Many 10's of billions of dollars of assets have been sold to pay for the gulf cleanup and compensation. Today's much smaller company is in the middle of downsizing its work force and further reorganizing to reflect this new reality. I've read that the dividend will likely be adjusted down to reflect the smaller, leaner company as well. BP could very well represent a good investment, but IMO the dividend represents a very weak thesis for buying shares.
Hi Hendi,
I did state clearly that I was scratching the surface.
Personally, and I'd hold my hands up and happily accept that I'm wrong if they do cut the dividend, but I don't think it will be cut. My reasons for risking the purchase in terms of dividend are;
BP could always suspend its stock buyback programme until oil prices recover.
They're currently holding 25bn in cash, enough to pay for the spill.
BP also has untapped debt potential. They could always leaver up on debt in order to pay the dividend.
I see potential for a revived BP in future compared to a lot of the (now larger) less streamlined oil and gas companies out there.
For me, their excellent placement in the gulf of Mexico which is a high margin region will help them weather the current storms of low oil prices. I feel BP is feeling the pain of downsizing and cutting now that many oil and gas companies might well have to feel in future.
All I was trying to do with the above example is to show a very 'on the surface' representative example in order to try and show the differences between different yileds as he posted a stock with about a 12% yield the other day. It wasn't intended to be a full rational of my purchase, I probably should have made this more clear on reflection.