Economy

BP Investors' Fears Grow They Could Lose Dividend

BP investors are increasingly worried that the quarterly dividends they bank on will be suspended due to mounting political pressure on the energy giant to not divert its financial resources away from compensating people in the Gulf Coast suffering losses due to the massive, ongoing oil spill.

President Barack Obama explicitly mentioned the dividend last week when he said during a visit to Louisiana:

... There are reports that BP will be paying $10.5 billion — that's billion with a B — in dividend payments this quarter.

Now, I don't have a problem with BP fulfilling its legal obligations. But I want BP to be very clear, they've got moral and legal obligations here in the gulf, toward the damage that has been done. And what I don't want to hear is, when they're spending that kind of money on their shareholders and spending that kind of money on TV advertising, that they're nickel-and-diming fishermen or small businesses here in the gulf who are having a hard time.

Such comments are making BP investors very nervous and helping to drive down the company's stock price.

The WSJ.com reports:

Shares in BP PLC plunged 15% in late-afternoon New York trading, as political pressure on the company over its handling of the Gulf of Mexico oil spill mounted and investors worried it might be forced to suspend its dividend.

The stock price hit its lowest level since 1996 a day after President Barack Obama said that he would have fired BP Chief Executive Tony Hayward by now if he worked for him.

BP shares have now lost just over half their value, giving up about $90 billion in market capitalization, in the seven weeks since the spill started.

Amid the increasing backlash against the company, shareholders are now increasingly bracing for the possibility that BP will be forced to reduce or even cancel its dividend, a key income source for investors and savers in the U.K. Concerns are also rising about the price tag BP will ultimately face.

Politicians in the U.S. say BP should be using all its resources to stop the spill and clean up the Gulf, not rewarding shareholders. The U.S. government's point man on the oil spill, Adm. Thad Allen, joined the chorus of criticism Wednesday, demanding BP provide more detail on how it is meeting damage claims from individuals and businesses impacted by the spill. Meanwhile, Interior Secretary Ken Salazar insisted that the Obama administration would make BP pay salaries of oil services workers who lose their jobs as a result of the oil spill.

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