BP plc - Uncomfortable in my holding

[Dividend Watcher]

Lewys, we've all been there before. Stop and think things through.

1. CEO Pay: They all try to squeeze every last penny out of their compensation despite what the shareholders say. It's a pretty good system they've got. If they have a "say on pay" vote on the proxy like U.S. corporations are required to have, vote no and move on. Look at the company results instead.
   
2. Do earnings or free cash flow cover the dividend? You want to make sure they're going to be able to continue pay and increase the dividend in the future. If it doesn't now, does management talk about it and seem to have a plan? The oil patch is going through a rough spot right now so they're all feeling the pinch.
   
3. Are earnings growing or is the prospect of earnings positive? Dividends come from earnings so keep an eye on their prospects.
   
4. Is it an outsized position in your portfolio plan? Where do your BP holdings stand in respect to where you want them to be in 5 or 10 years. When you're in accumulation phase, it's common for some holdings to be outsized compared to other companies in the portfolio. It will balance out as you make purchases over time. You do have a plan started, right?
   
5. If you sold it, what would you do with the proceeds? It's good to have a list of replacements ready. Sitting in cash for extended periods, especially at these rates, will not keep you moving forward. Churning your portfolio just because you're nervous just increases your expenses and lowers return.
   
6. Buyouts usually come with a premium to what the company is worth. If there is a bid and you don't want to hold the resulting entity, then you can sell it and collect the premium then. Until then it's all rumors and trading rumors is a bad idea in my opinion.
   

I don't know much about BP. I'm happy with my CVX holdings even though they're getting cash flow squeezed too. I believe management has a plan and will continue to reward long-term shareholders even if the dividend gets frozen or increased by a penny this year.

BP had quite the operational challenge with the Gulf spill. They seem to have made some adjustments to management since then and are moving forward. Don't be too worried about the continued lawsuits now, they'll take years to sort out. Most of the immediate costs to remedy the situation have already been spent.

If you are still nervous about it, then yes, sell half and move on.