Is BP's dividend safe?
BP raised its quarterly dividend by 12.5% in the third quarter of last year, following a 40% rise in underlying earnings. The move was an attempt to win back the support of institutional investors, but the reality is that BP is still a company in transition.
In a worst-case scenario, BP could be hit by a $21 billion fine from its Clean Water Act court case and by falling oil prices at the same time. Such a scenario would hit the company hard and would threaten its dividend, making it vulnerable to a takeover bid. However, I don't think this will happen. I expect to see Brent Crude stay above $100 per barrel and I think that a lower fine for negligence, or even a settlement before the case reaches court in February, is much more likely.
Overall, I think that BP's dividend looks reasonably safe, but is unlikely to grow significantly over the next couple of years.
BP's dividend will increase over the next few years! Their cash flow is increasing by 50% later this year based on brent averaging $100! BP and Rosneft are working together so if BP can help them become more profitable Rosnefts dividend policy is to pay a minimum of 20% of net profit to shareholders....its dividend will increase too! Brent is still $110+! It's not going below $100 unless there is a financial meltdown. BP's margins are expanding so it'll be better able to handle a decrease in oil too. Oh and BP will start a share buyback later this year!
Buy BP and forget about it! Collect the dividend and treat it as an inflation indexed annuity!