Pay the Dividend, BP!

Yesterday, embattled oil giant BP (NYSE: BP  ) announced that it had agreed to contribute $20 billion into an escrow account to pay legitimate claims arising from the Gulf of Mexico oil spill. This is the right and honorable thing to do.

What is not right and honorable is the concurrent announcement that the company is also suspending its dividend and, especially, canceling the previously announced dividend, which was to be paid later this month.

As a holder of common stock, there are only two ways for me to make money: Hold while the price of the stock rises and then sell, or hold and receive dividend payments. The risk I take as a shareholder is that the share price will decline, or that the company will cut or halt its dividend.

Well, right now, I'm sitting on a 45% loss on the shares, which I bought before the disaster struck. I'm not complaining about that; it's part of the game, after all. And the halting, or at least reducing, of the dividend was in the cards as soon as the rig blew up. That's OK, too ... mostly. (Though maybe I should reallocate my holding to Big Oil competitor ConocoPhillips (NYSE: COP  ) . It's paying 4%.)

No, what really ticks me off is that BP's obligation isn't just to the people affected by the spill; it's also to its owners. By taking this action, the board is, essentially, putting the screws to us. People like me and the thousands of others who rely on dividend payments as part of their income.

I can understand the reasoning behind the move. Paying out a dividend in the middle of this disaster does not spin well in the media. But let me tell you, Chairman Svanberg, it also doesn't spin well with the company's owners, the people you are supposed to represent. After all, ExxonMobil (NYSE: XOM  ) didn't scrap its dividend during the Valdez situation.

By canceling the already-promised payment -- a promise made a week after the rig blew up -- BP is breaking faith with us.

Pay the June 21 dividend, BP. Then suspend the dividend if you have to. That would be the right and honorable way to proceed.

Fool editor and BP shareholder Jim Mueller doesn't own shares of any other company mentioned. The Motley Fool has a disclosure policy.


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  • Report this Comment On June 17, 2010, at 1:54 PM, TMFGebinr wrote:

    Bubbles,

    Glad you liked my article.

    What you have to say doesn't change the point I was making about an obligation to shareholders, though.

    Jim

  • Report this Comment On June 17, 2010, at 2:01 PM, Hairy0524 wrote:

    While I don't think I can compete in terms of clarity and well thought posting such as Bubbles, I will say that BP was left with little choice but to suspend the divident. Perhaps they can afford to pay out the dividend, but the public perception and the PR hit that BP would have taken would have made its come back even more difficult. The headwinds are already very very strong. The government has BP dead in its sights and the people of this country have very little reason to get behind big business after what has transpired over the last 3 years. Politicians are going to jump at the chance to take down a big corporation as proven by the hearing today (With exception of the one Texas rep).

    While Exxon may not have suspended their dividend during Valdez, there also wasn't a camera on the spill 24/7 as there is now. The internet wasnt around then and Twitter and FaceBook weren't even a twinkle in daddy's eye yet. Newspaper and cable coverage may have covered the story well, but it wasn't in the public's face 24/7 as it is now.

    The best long term move for BP is to suspend the dividend (for public perception if nothing else) and put a muzzle on Hayword and any other high ranking official that just can't seem to say the right thing.

  • Report this Comment On June 17, 2010, at 2:14 PM, FourBees wrote:

    This article is just sour grapes that the investment took a hit. Unless you are a short sighted investor, the suspension of the dividend is no big deal. As previously pointed out, if you are so risk averse that you cannot withstand missing a single dividend, then you should have exited this stock the moment you knew the oil spill was ongoing. It is in the medium and long term interests of BP to show good faith in paying for the cleanup. Other funding to pay for the clean up is not so easy to get, when the company has unknown and increasing liabilities. the consequence of not acting responsibly will be additional government regulation and interference.

    Additionally, as part owner of the company, your responsibility is not just to sit back and collect dividends. You also need to step up and take responsibility for the corrective action. When you are a shareholder your corrective action is taken in the fashion of a cut in the dividend.

    If you are angry with management, you should be angry with the fact that safety systems were not good enough to prevent this from happening in the first place, not get upset when they act responsibly after the fact.

  • Report this Comment On June 17, 2010, at 2:34 PM, sseth wrote:

    There is a fundamentally wrong thinking in your article.

    I am writing this not as someone angry at BP or as someone who was affected by the spill. This is about Corporate responsibility, and what I believe that a public company is.

    The statement that you make -- "BP's obligation isn't just to the people affected by the spill; it's also to its owners" -- is wrong at a couple of levels.

    1. "BP's obligation" should read "BP's Management's obligation". The owners *are* "BP".

    2. As an owner, you are BP and your responsibility is towards the people affected by the spill. If you have to take a "cut", then so be it. How is it different from if your car causes some damage.

    Having said that, there is no reason to believe that BP had to suspend the dividend to pay for any restitution. It seems to be a publicity move.

  • Report this Comment On June 17, 2010, at 4:15 PM, Pbomb wrote:

    Jim,

    While I can understand that it is frustrating to have the dividend cancelled even after the company has reiterated that it would be paid, BP was left with no choice. Obama and his crusaders were after BP blood and in a game of political brinkmanship helped talk the stock down and increase the rates at which BP could borrow. If that climate persisted you could end up with a situation similar to a run on a bank where all counterparties refuse to extend credit and BP would have serious difficulties remaining viable. To remove that political threat they had to offer Washington what they wanted - $20 Billion, suspend the dividend and give up control of the reimbursement process.

    However, what is clear to me is that BP, in its actions yesterday, was acting as a board must - in the best interests of its shareholders. The distinction is that the company's survival was at risk if the dividend was maintained and the $20 billion escrow fund not provided and therefore to continue to pay it would have risked your entire investment in BP not just the dividend. I think this might be a case of not seeing the forest for the trees.

  • Report this Comment On June 17, 2010, at 4:20 PM, TMFDiogenes wrote:

    It would be totally irresponsible for BP to pay a large dividend while their liabilities are unknowable, estimated as high as $80 by Goldman, and rising. If you run out of cash, that's not good for the society you are responsible to compensating for the damage you caused, or to your long term shareholders who expect you to not go bankrupt due to negligence.

  • Report this Comment On June 17, 2010, at 4:53 PM, DaytonFlyers wrote:

    Suspending the dividend was the prudent thing to do. BP has no idea what the liabilities will be, conserving cash just in case, is the wise thing to do. What are you going to be more upset about missing out on a few dividend payments or seeing the stock go to zero?

  • Report this Comment On June 17, 2010, at 4:54 PM, Melaschasm wrote:

    From a legal standpoint, BP's cash belongs first to the victims of the oil spill, second to the bond holders, and third to stock owners. To pay a dividend at a time when BP may not have enough cash to cover its short term expenses would be borderline criminal.

    While I personally believe that BP will survive this without bankruptcy, until the full cost of the spill can be estimated, BP can not pay a dividend. My complaint is that BP repeatedly said they would still pay the dividend when it shoudl have been obvious that they faced a very large and uncertain liability.

    Would you argue that C or AIG should have kept paying dividends in the middle fo the banking crises, before they officially acknowledged that they needed big government bailouts to survive?

  • Report this Comment On June 17, 2010, at 5:15 PM, ajaykc wrote:

    How about if beneficiaries of the oil explored by BP or any other oil companies also take some pain and start driving fuel-economic cars rather than driving gas-guzzlers so there companies don't have to drill in impossible places?

    People oppose solar/wind or any alternative energy because they require subsidies to support the business. Isn't this disaster demonstrate that at the end we have to pay the price either in the form of subsidies or as a disaster relief? I own BP's stocks and I am glad that BP is acting responsibly and I would have been happier if BP had taken some dividend cut rather than trimming it completely to maintain its corporate responsibilities. People who own BP's stocks may not be very different than people who are facing the disaster so its a double pain.

  • Report this Comment On June 17, 2010, at 5:27 PM, CustardPies wrote:

    This statement makes your article fundamentally flawed: "...BP's obligation isn't just to the people affected by the spill; it's also to its owners."

    As a shareholder of BP, you are BP. It's like saying "BP has an obligation to pay itself money every quarter." As a part-owner of BP, YOU are the one who owes the obligation to the people affected by the spill... because you are BP. The board has decided that obligation will come at the expense of your dividend. I understand your frustration, but as a corporate shareholder, receipt of a dividend is not a right or a privilege you ever "deserve," regardless of your reliance on it in the past. It's icing on the corporate cake.

    Here's to BP at $50 by years end with dividends starting up again in 2011. I wish you and everyone in your shoes all the luck.

  • Report this Comment On June 17, 2010, at 5:32 PM, mhonarvar wrote:

    At Oppenheimer & Co, oil industry analyst Fadel Gheit starts with a worst-case scenario of $6 billion in cleanup costs and $6 billion in damage claims every year for 10 years. That works out to $120 billion.

    Even if the payout reaches that level, Gheit said, the company would generate some $14 billion a year of "free cash flow" and still have enough cash to pay shareholders half the $2.6 billion quarterly dividend BP recently suspended.

  • Report this Comment On June 17, 2010, at 5:47 PM, blacktreechaser wrote:

    I sold pretty darn quickly after the accident. I did not know if the stock would rebound or not, but I didn't feel like living with the uncertainty...there are plenty of other fish in the pool to pick from.

    In my opinion, I thought it was smart of BP's management to suspend the dividend for PR only. If your interested in your shares, you should probably thank them instead of berating them.

    Your dependent on the income? Shift to fixed income instruments.

  • Report this Comment On June 17, 2010, at 5:50 PM, blacktreechaser wrote:

    Whoa Nellie.....I just looked at the by-line.

    I'm very surprised (astonished??) that the article was written by an MF editor. I'll leave it at that.

  • Report this Comment On June 17, 2010, at 5:59 PM, TMFGebinr wrote:

    Hi blacktreechaser,

    Why should me being an editor for TMF as well as the author of the article surprise or astonish you? That article is my own opinion and is a legitimate viewpoint in the investing world. Diversity of opinion is something that TMF has long held to be important and valuable.

    Jim

  • Report this Comment On June 17, 2010, at 6:39 PM, D2009 wrote:

    "Responsibility to the shareholders" is too often used as an excuse for businesses behaving badly in the name of profits.

    When do businesses, who made these bad choices and caused these problems, take any responsibility? Maybe now, by footing the bill.

    When do shareholders, who benefited from those bad choices, take any responsibility? Maybe now, by eating the losses.

    You invested in a company whose ongoing deliberate disregard for safety has created one of the worst ecological (and economic) disasters in the history of the world -- and you think you should still get paid?

    Shame.

  • Report this Comment On June 17, 2010, at 6:43 PM, yeunganson wrote:

    BP should absolutely not pay dividends until the clean up and victims are properly compensated.

    Shareholders are owners of the company. Before you can take the money and run as owners, you must first pay your bills with the money you have.

  • Report this Comment On June 17, 2010, at 7:03 PM, park94 wrote:

    BP should have at least honored it's obligations with investors. It's obvious they don't care about shareholders. I'd say they care about the same for shareholders as for the environment, none.

    Bottom line is they didn't please anybody. They're inept at drilling, inept at solving problems and inept at negotiating. If you're dumb enough to invest in this company the dividend is the least of your problems.

    .

  • Report this Comment On June 17, 2010, at 7:09 PM, Alchemyfinancial wrote:

    I for one agree with you Jim, especially being that I am a shareholder of BP for a company i run that gives away 100% of it's profits (via dividends and ONLY dividends) to various charities ( make a wish foundation, college scholarship funds etc.). I have worked extremely hard to build a portfolio that now yields over $70k a year to these organizations through dividends only. (all of which I do for no fee whatsoever... it is simply the right thing to do) But I have a more sensible alternative. BP's next dividend goes ex in Aug, so pay the June dividend and let the shareholders ie: THE OWNERS OF THE COMPANY vote on whether to reduce, suspend or continue the dividend. It is after all our right to decide what is done with our OWN MONEY! if the company goes bankrupt and all shares go to 0 because of our decision, at least it will be our decision. There is more than enough time to organize a vote. I know alot of sick children I DO NOT want to say "I'm sorry this is all I can give you this year" too.

  • Report this Comment On June 17, 2010, at 8:02 PM, allstarvulture wrote:

    Jim-

    I think I'll be one of the few to agree with you. I don't own a single share of BP, so I have no vested interest in either the share price or the dividend.

    The crux of the matter is BP's prior promise to pay the dividend. They made a commitment to their shareholders and they've decided to renege on that commitment.

    The right thing to do would have been to pay the announced dividend and then suspend any further payments going forward. As is stands now, how confident should anyone (shareholders, regulators, those concerned with the environment) be that the organization will follow through on any future commitments?

  • Report this Comment On June 17, 2010, at 10:11 PM, Grandepiacere wrote:

    Is this article for real? Look, you invested in a company that through bad luck or negligence has created what is being called the greatest man made disaster ever. The reality is no ones knows what the real costs of the disaster will be. 20 billion may not even begin to cover the real costs. The Exxon Valdeez spill was in 89 and Prince William Sound still has not not recovered. The writer seems to think that as an investor dividends are some how sacred ground not connected to the companies market value. Wrong, dividends are just another form of return on your investment and you bet on the wrong pony.

  • Report this Comment On June 17, 2010, at 10:14 PM, gman5556 wrote:

    Um with what left over cash can they use?

    Don't cut corners to save on costs. That was the cause of the problem, because they cheaped out to save an immaterial amount of money. Why should the shareholders keep receiving their dividends?

    Obama has every right to put the heat on BP. They caused one of the worst, if not the worst, environmental disaster ever. They have to pay for it. "Oops sorry" doesn't cut it. What do you expect? For the administration to just sit by and do nothing? Or that there should be no repercussions? Someone has to be held responsible.

    But then its always going to be Obama's fault somehow isn't it. His action or inaction. Paying a dividend would be the most ineffective way to manage whatever cash is left over, if any, further endangering the company's rebound. Shareholders exercise their right to vote, and this time the outcome was unfavorable. Shareholders are certainly not the victims in this scenario.

  • Report this Comment On June 17, 2010, at 10:22 PM, GenChaos wrote:

    The company is spending a ton of money to cleanup the mess it created. There were rumors of bankruptcy for a while so I don't see why canceling one Dividend payment is such a bad thing in that respect? Companies don't have any obligations to pay ordinary dividends if they feel the funds can be better utilized somewhere else. Right now it makes sense for BP to conserve its resources since the spill still has a long way to go.

  • Report this Comment On June 17, 2010, at 10:55 PM, lodbjj wrote:

    To begin I also own shares of BP which to me means to I own a part of the company. I bought BP for the dividend and because I believe that oil is something that is going to be needed for a long time and will not get any cheaper in the future.

    That being said I have no issue with what BP is doing with the dividend. I see the move as a responsible thing to do considering the situation. This spill makes the Valdez spill look like a minor issue and the spill has yet to be stopped. What would you rather BP pay you the dividend and then end up going bankrupt (GM anyone).

    SInce I have an interst in the company I am glad they are conserving there cash and using the money that would be payed out as a dividend to help fund the cleanup. I am fine if they have to do it for the next year or even two if it comes to that. What I want to see is BP come through this stop the spill and pay for the damages so that the company can survive and continue to increase in value and pay a dividend in the future.

    I would advise you to quit focusing on the short term effects on the dividend because until the leak is stopped nothing else BP does really matters.

    Long BP

  • Report this Comment On June 17, 2010, at 11:28 PM, susan400 wrote:

    Jim, You may be unaware, shareholders own

    BP. paying teh div or not does nothing to change the shareholders net worth, in ir out of BP 10 B ius 10b.

    It being rssponsible not paying until this is cleaned up,.

    If people sell because they stop paying, I want to buy those people's shares.

    If you don't know who is the panzi at the pocker table, it is YOU!

    Susan400

  • Report this Comment On June 18, 2010, at 12:02 AM, Morijo wrote:

    BP needs to pay and chosing to do that by suspending the dividend is practical. If they had chosen to do both an 20b escrow account and pay dividends, I think their stock price would have slid further as that seems like poor risk management. During the depths of the recession many many companies suspended their dividends to guard their cash. Seems prudent of BP as this is worse than the recession for them. I do feel sorry for the folks who rely on dividends for income but hopefully they are diversified, also for reasons of risk management.

  • Report this Comment On June 18, 2010, at 12:14 AM, Superdrol wrote:

    I think the dividend suspension was way out of line. The control the Government is taking is crossig the line. Unlike general motors BP has not taken Government money, asked for any, or implied at the moment it will not pay.

    Also there is zero concern for shareholder value involved. General motors, BP, and Goldman Sachs are just being used as politcial pawns with zero regard for shareholders in the process. I'd just stay away all together. The dividend cut while expect was extremely over the line in my opinion. I'm sure Obama will also push to get Tony Hayward fired as well.

  • Report this Comment On June 18, 2010, at 4:14 AM, minoh wrote:

    Holding shares means part ownership in a concern. With ownership comes responsibility, not only entitlement.

  • Report this Comment On June 18, 2010, at 7:13 AM, plange01 wrote:

    6 months from now after we have had 2 more disasters the bp spill will be forgotten just like the recent massey mine explosion.....the press moves on and the dividend quietly returns...

  • Report this Comment On June 18, 2010, at 7:30 AM, Weequay2 wrote:

    Your reasoning for BP's "responsibility to shareholders above all else" is about as flawed as your idea to not sell the stock after the spill started. Focusing on the div is focusing on short term gains over long term financial health of the company.

    The deeper problems is this: If you invest in a company that is competent and doesn't have 760 egregious willful safety violations then you won't have to worry about the stock dropping off a cliff when one of those violations goes wrong.

    BP isn't good at making anyone happy right now, if it were my money I'd invest it in a better oil company. Let this one blow over and don't go back until the follow the safety rules. If you are so focused on the short term you should have sold about 50 days ago.

  • Report this Comment On June 18, 2010, at 7:42 AM, Manticorr wrote:

    BP should pay the dividend. Remember BP only has a 65% stake in this. The LAW says that liabilities were capped at 75 million. [I think that was the correct figure] There is a slush fund that has probably been tapped by the politicians for other uses that should be covering part of this.

    BP accounts for a goodly portion of retiree's income portfolios in Britain and elsewhere.

    Why not at the same time put politicians on Social Security like the rest of the workers so that the agency problem with unlimited potential liabilities and costs directly affects their future income. Why should the US taxpaxer have to pay so they can live the good life with the custom retirement packages they have?

    The BP spill affects less than 2 % GDP and most of that is directly in the oil industry. Yet how much time/money/man hours have been spent by politicians accross the US on the matter? What has been accomplished by this time? The politicians can certainly affect the % GDP the spill impacts probably upwards. Then cry BP you owe!

  • Report this Comment On June 18, 2010, at 7:51 AM, Origin97 wrote:

    It seems to me, that it's better to take your losses now, suspend the dividend to hold off bankruptcy off for a bit. and if you have faith in BP, then take advantage of the bargain. then sell your share and move into something a bit less risky if you're depending on dividends so much. Eaton makes great electrical equipment they pay 3.1%.

    BP may be a temporary distraction from unpopular policy, but BP should take care of the gulf first. Also, Do we want to push BP of of the US?

    This is part of the game... add it to the 'oops!' column.

  • Report this Comment On June 18, 2010, at 9:01 AM, Melaschasm wrote:

    BP has unlimited liability for direct clean up costs. The 75 million was a limitation for other potential liabilities. Also the government is likely to retroactively change the law, and increase BP's liability dramatically.

  • Report this Comment On June 18, 2010, at 10:08 AM, Alchemyfinancial wrote:

    I for one agree with you Jim, especially being that I am a shareholder of BP for a company i run that gives away 100% of it's profits (via dividends and ONLY dividends) to various charities ( make a wish foundation, college scholarship funds etc.). I have worked extremely hard to build a portfolio that now yields over $70k a year to these organizations through dividends only. (all of which I do for no fee whatsoever... it is simply the right thing to do) But I have a more sensible alternative. BP's next dividend goes ex in Aug, so pay the June dividend and let the shareholders ie: THE OWNERS OF THE COMPANY vote on whether to reduce, suspend or continue the dividend. It is after all our right to decide what is done with our OWN MONEY! if the company goes bankrupt and all shares go to 0 because of our decision, at least it will be our decision. There is more than enough time to organize a vote. I know alot of sick children I DO NOT want to say "I'm sorry this is all I can give you this year" to.

  • Report this Comment On June 18, 2010, at 10:54 AM, surfnskate wrote:

    As part owner of this company...you seem more concerned about the money you think you ought to have coming to you....instead of the lives lost and damage done by supporting and investing in this POS. Remember you're part owner...you're partly responsible. Perhaps I'd have a little more sympathy for share holders if they understood this fact.

  • Report this Comment On June 18, 2010, at 11:28 AM, martinfool wrote:

    It seems to me that if BP paid the dividend the stock value would go down by more than the dividend. So you lose anyway. Irrational or not BP is a popular whipping boy right now. And as others have pointed out, net value of the company is retained either way. If you need income invest in safe bonds.

  • Report this Comment On June 18, 2010, at 11:39 AM, gddunton wrote:

    What about an option that hasn't really been explored: Issue the dividend in stock. This will have both sides of this issue covered 1) withholds the cash needed to ensure the clean up is done to the best of BP's 2) provides some sort of compensation to the shareholders, who can in turn sell them for the cash needs.

  • Report this Comment On June 18, 2010, at 11:44 AM, Reddrummer wrote:

    That dividend is a legal obligation and is on their books as accounting policies dictate. Once you declare it you are legally obligated to pay it, i dont see what the debate is. You pay your legal obligations unless you enter chapter 7 or 11.

  • Report this Comment On June 18, 2010, at 12:22 PM, surfnskate wrote:

    I believe Dorothy Brown, a professor of law at Emory University, put it best. She received her J.D. from Georgetown University Law Center and her masters of law in taxation from New York University.

    Re: Dividends

    "Dividends are not legally required; they are optional. If BP does not pay a dividend, a shareholder cannot go into court and sue BP. Dividends are to be paid only when the company has enough money to take care of its operations, including potential liability for the spill."

    RE: Ownership of BP common stock

    "Shareholders who own stock in an oil company that drills offshore without adequate plans in place, should disaster strike, have made a risky investment indeed. Given the potentially catastrophic impact of the oil spill, how can BP really know how much all of the costs will be? And the safest course of action is to wait until the company gets a better handle on its potential liabilities, which seem to be growing daily."

    My opinion:

    With 700+ willful misconduct/neglegance charges against BP in the last 3 years...one has to wonder how anyone in their right mind could think this was a safe investment. This was no ordinary accident....It was a result of BP's continuing culture of willful misconduct.

  • Report this Comment On June 18, 2010, at 12:42 PM, Reddrummer wrote:

    "Dividends are not legally required; they are optional. If BP does not pay a dividend, a shareholder cannot go into court and sue BP. Dividends are to be paid only when the company has enough money to take care of its operations, including potential liability for the spill."

    This is true, but after you declare a dividend it is legally required. Thats why its subsequently recorded as a liability on the balance sheet. Now if a company declares excessive dividends outside what they normally do in order to pay out owners before other creditors then the dividend can be disallowed. Seeing as it was their usual quarterly dividend and $2.5B isn't going to make or break the gulf situation, they absolutely should pay the dividend. Future dividends are optional, but if you declare a dividend you are obligated to pay it and the dividend in question was declared and the ex-dividend date even passed.

  • Report this Comment On June 18, 2010, at 12:59 PM, INoFoolin wrote:

    The management of BP has ALWAYS put the short term interest of shareholders ahead of long term by operating unsafe refineries and drilling operations. In this instance and the Texas City refinery fire they have been CRIMINALLY NEGLIGENT. Before you invest in companies you should do due diligence on their safety, environmental and accounting practice risks. Don't be foolish (in the true sense of the word), if you own BP sell now while you can still get out.

  • Report this Comment On June 18, 2010, at 1:51 PM, Cicciano wrote:

    <i>"BP's obligation isn't just to the people affected by the spill; it's also to its owners"</i>

    While $2.5B probably will not break the bank on the cleanup, the perception of paying that amount, declared with <i>full knowledge</i> that the well was leaking and could be catastrophic could very well have put the company in a receivership or other variety of penalty box.

    So BP was looking after its obligation to the owners by making sure that they didn't kill a much longer series of future payments for owners down the road.

    IMO, the title of the article should have been "BP--what were you thinking issuing that dividend in the first place?"

  • Report this Comment On June 18, 2010, at 2:13 PM, AirForceFool wrote:

    Jim...

    Agree... to those of you that are taking the moral high ground, I hope that the rest of the country (who agree with you for the most part) can handle the decisions the media forces BP to make. I'm not advocating that the dividend shouldn't have been suspended... I don't have enough information to make the assumption that's what's best for BP... and make no mistake about it... what's best for the gulf coast cleanup and BP are the same... I hope they make a ton of money, and use however much it takes to clean up the mess... it would have been better to pay the dividend, and then dilute shares... it isn't like they're not going to do it anyway... and it's a zero sum gain anyway... dilute shares and the share price goes down... if you chose not to take into account the actions of the shareholders, you're looking in increase risk that BP goes under... a lot of folks are O.K. with that... quite a few are probably praying for it... but if they fold, good luck getting additional funds for the cleanup. Remeber that there are tens of thousands of British citizens that have this stock becuase of the dividend... true, this should have all been part of the risk analysis that BP did that should have prevented the mess in the first place... BP has stated that they will fix the mess. At this point I believe them. You could argue that paying a dividend only weakens the company by decreasing cash flow... at what risk I ask... the cleanup isn't going to come down to the last couple billion... scary as that is to say...

    Chris

  • Report this Comment On June 19, 2010, at 2:01 AM, m0j0m0j0 wrote:

    obama put a gun to our head and stole our money just to create a 20 billion slush fund pay to the unions the salaries he stopped you can.t just cannot stop for 6 months these rigs are booked they more a few miles over and drill off cuba for china you think obama even cares this is just a crisis to use to promote the insane marxist ideology that NEVER EVER WORKS AND ENDS UP KILLING 1,000 of people where is it legal for the officers of a corporation to just give away my money when there has be no court order or paying a valid claim this just armed robbery we deep water drill because the loonietoon wacko's won't let us drill on proven oil reserves on land and shallow water this all a smokescreen to pass tax and tax the out right hypocrisy of politicians who have wasted trillions of dollars never stop spending dare to tell us about something they don't know a thing about

  • Report this Comment On June 19, 2010, at 2:09 AM, ValuePEG wrote:

    Obviously there are many opinions on the matter, I do not and never have owned BP, but I do believe that the shareholders will come out better by the suspension of the dividends. Legally they were an obligation once announced as a few have stated, but at that time the incident appeared to be a minor inconvenience (my regards to the 11 who died though) instead of a major catastrophe. Luckily for the shareholders the pressure from Obama has allowed them an excuse not to pay them, which decreases the amount of debt required to be obtained at less than favorable rates (i.e. saves the shareholders money). The only people that should possibly feel cheated by this are shareholders who owned as of 5/5/10 (EX date) but sold prior to 6/16/10's announcement that it was being canceled (that could be 10's of 1000's though). Anybody that still owns BP will benefit in the long run that they conserved their cash, with over 6000 and counting lawsuits cash is truly king.

    Here's a dumb question - Who has ever heard of 6 weeks between "Exercise Date" and "Payment Date" - my experience is 1-3 weeks? - If this was paid before things got ridiculous in June it would be a moot point now.

  • Report this Comment On June 19, 2010, at 6:46 AM, sgarnett wrote:

    There seems to be a bigger lag between ex and payment for European stocks in general.

    Dividends are, fundamentally, a return of excess cash (generally profits or free cash flow). In the US, there is an absurd tradition of borrowing money to pay the dividend when there isn't enough cash to cover it.

    As a shareholder, I certainly want companies to return some cash to me when they have it (are you listening, Apple?). However, I NEVER want the company to borrow money (and pay interest) to give to me, because ultimately I am paying that interest. It's sort of like taking a cash advance from a credit card.

    FWIW, BP is also making arrangements for a $5bn bond issue.

    I greatly prefer the more common European approach of paying a variable dividend that is actually determined by the business results instead of treating it as a fixed liability. I still prefer the US approach of paying a dividend quarterly instead of yearly; I just wish the dividends actually reflected business results.

    I do sympathize with the stockholders. Since the recession began, several of my companies have cancelled dividends. They all publicly reiterated the safety of and commitment to the dividend right up to the moment they canceled it.

    However, I feel far more sorry for the many people in the Gulf who have lost or will lose their entire livelihood - their jobs, their businesses, their homes. They will lose far more than a few quarters of dividends through no fault of their own.

    It will take YEARS to recover from this disaster - if a full recovery is even possible.

    I do find the British response to all of this amusing. Has anyone noticed how many advertisements in the USA use actors/salesmen/narrators with British accents? Anti-British? If anything, we seem to be a nation of Anglophiles.

  • Report this Comment On June 19, 2010, at 12:43 PM, MRKL wrote:

    We live in a sick world of opinions shaped maliciously by a band of media organizations out to criticize any established entity. Be it governments or business.

    The latest is a Yahoo headline...first place on "Top Stories" that CEO Tony Hayward is attending a "glitzy" yacht race. The Isle of Wight race which is one of the most prominent in the world. For sure BP is some sort of sponsor.

    Just like AIG. Buses of people to see the big homes managers and employees bought with "tax payers money!! End of the day the SEC and justice department just expectorated the AIG Manager and the whole Financial Products Division from any criminal or civil wrong doing.

    But the media did stir up the followers to raise their pitch forks and threaten the lives of the AIG employees and their family's.

    Hayward was given no credit for living and working in Louisiana for weeks while still running a great company. He is responsible for the outstanding financial results and attempt to change the culture of BP. How can our officials call for his firing because he says I want my life back? How many interviews with trick questions did it take to get one misspeak?

    Again we have some very scary young kid reporters and broadcasters trying to drum up dirt on our politicians/business leaders/ religious leaders and anyone else in a leadership position.

  • Report this Comment On June 19, 2010, at 4:54 PM, GrumpyGopher wrote:

    Jim,

    I agree with you. i think they should have paid the dividend they 'promised'. I think Obama and the government set a bad precedent in forcing BP to create an escrow account for the spill.

    I'm not sure if asking the shareholders to vote on suspending future dividends would have been a great PR move. They should have announce to suspend the future payments until the leak is at least stopped.

  • Report this Comment On June 22, 2010, at 3:25 AM, daddysretirement wrote:

    Well players, I've got a good news/bad news story for ya. BP's stategic relationship with the United States will preclude the companies bankruptcy and/or failure. Both our "special relationship" and the necessity of continuing dividend rewards to multiple pension funds demands that BP remain solvent and profitable for the benefit of both the UK and the USA. BP is too big to fail. This is fact.

    That is the good news. The bad news is that it will take time. Sell your Grandma's respirator, hawk your cars, toss your gold, turn your pockets inside out, dig for change in the sofa and pour everything you have into BP. In one to three years you can double your money. Even as a take over target, the current price will explode. Never in the history of proven energy stocks have prices been this foolishly cheap.

  • Report this Comment On June 22, 2010, at 10:32 PM, KayakerRW wrote:

    I'd like to see BP shareholders and the public demand that BP suspend any bonuses to executives and place the bonus money in the escrow account. I'd also like to see at least a 10% reduction in the expense accounts for BP executives as well (that money to go in the escrow account as well). Once the dividend has been restored and paid twice, the bonuses can be reinstated.

  • Report this Comment On June 24, 2010, at 11:53 AM, GordieRobbins wrote:

    BP is getting off lightly. I would have frozen their US assets, taken away their oil wells and revoked their drilling rights. They are a bunch of liars and I don't trust their word based upon their previous actions.

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