BP Shares Fall As Dividend Cut Appears Imminent
- June 9, 2010
- Dividend Investing, Dividend News, Dividend Stocks, High Yield Dividend Stocks
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BP (BP: 46.77 -0.43%) shares plunged nearly 16% today as investors dumped the stock since a dividend cut appears imminent.
The dividend yield on BP’s stock jumped to 11.5% as the traded below $30 for the first time since 1996. However, with each passing day it seems more unlikely that investors will see those dividend payments.
Political pressure continues to mount for BP to suspend or drastically reduce their dividend payment. Today more than 40 lawmakers joined Senators Charles Schumer, D-NY, and Ron Wyden, D-Oregon in calling for BP to suspend their dividend and dedicate their financial resources to stopping the oil spill in the Gulf of Mexico.
Dividend investors have relied on BP’s dividend payments for years. The oil giant has not cut its dividend payment since 1992. That streak is likely to come to an end very shortly.
Overall, we believe the market is overly pessimistic about the future of BP these days. We view the odds that BP will need to file for bankruptcy as extremely low. We also don’t believe that BP will become a takeover target. However, we do expect that BP will be forced to temporarily cut their dividend.
The political pressure is just too great for BP CEO Tony Hayward to ignore.
Ironically, when BP does announce a dividend cut or suspension, that will probably be the time to buy.
