When BP finally resummes dividend payments after the 2010 moratorium how much can cash are shareholders expect to receive?
The answer, via the dividend swaps market, is a lot less than the 56 cents (or 14 cents a quarter) BP has paid for the past couple of years.
Tables and graphics from Citigroup.
Based on the pixel time share price of 372p that implies a prospective dividend yield of 4 per cent for 2011 and 5.3 per cent in 2012.
So how does that compare with BP’s peers?
Well, Royal Dutch Shell offers a prospective dividend yield of 6.3 per cent for 2011 based on consensus forecasts from Reuters, while Total stands at 5.9 per cent. (We will update the post with a dividend swaps forecast when available).
And the good news for BP shareholders it Citi’s sales desk believes BP will comfortably be able to afford the dividend implied by the swaps market.
Management will consider restarting dividend payments with its Q4 2010 results in Feb 2011, at which point they should have a better understanding of the extent of the leak, clean-up costs, litigation risk etc; elements which at this stage are unquantifiable. However, management appears to be taking a very prudent approach with its balance sheet, while also being politically pragmatic – i.e. planning to sell $10bn of assets and suspending dividend payments. It is reasonable to assume that BP will be in a position to resume dividend payments with its Q4 2010 results, and that a dividend set around half the current level (i.e. c$0.07/sh), its yield would be comparable to its peers.
Related links:
Macondo, in historical Hollywood context – FT Alphaville
As the execs turn themselves in, BP turns itself over… – FT Alphaville
Who’s not trading with BP? – FT Alphaville
BP has nothing to fear… – FT Alphaville