Fitch Ratings Believes BP Dividend Is Safe
- June 7, 2010
- Dividend Investing, Dividend Stocks, High Yield Dividend Stocks
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Fitch Ratings downgraded BP’s (BP: 46.77 -0.43%) credit rating last week from AAA to AA. However, the rating agency believes the oil giant’s dividend is safe despite the widespread speculation of an imminent dividend cut.
Jeffrey Woodruff, an analyst at Fitch, told Bloomberg Television in an interview Friday, “We’re not forecasting a dividend cut. The company still has the financial resources necessary for cleanup and containment costs, but on balance the business risks are growing.”
BP shares have plunged 38% since the Deepwater Horizon rig exploded on April 20th. The company’s market cap has dropped by over $72 billion during that time period.
The falling stock price has produced an accidental high dividend yield for BP. Based on Friday’s closing price BP shares offered a current yield of 9.0%.
However, dividend investors are concerned that they may never get to see that dividend payment. Last Wednesday, U.S. Senators Charles Schumer, D-NY, and Ron Wyden, D-Oregon, sent a letter to Tony Hayward, arguing that paying a dividend before the ultimate cost of the disaster has been calculated would be “unfathomable.”
On Friday, BP CEO Tony Hayward tried to reassure investors that the company was financially stable. However, he failed to calm fears over a dividend cut. In fact, he tried to skirt the issue by saying that future dividend payments will be at the Board’s discretion.
It’s likely that the longer this ordeal drags on, the more likely that BP will be forced to suspend their dividend payment.
