As dividend income investors, sustainability of our dividend income is all-important. How do BP (BP) and Shell (RDS.A) measure up?
BP is paying a final quarterly dividend of US 8¢ going ex-dividend on 15 February and due on 30 March. The sterling conversion will be announced on 19 March. That is 14.3 percent higher than the 7¢ paid for each of the first three quarters. A larger dividend increase could have looked politically unwise ahead of the trial into claims relating to the Gulf of Mexico disaster, which is due to begin on February 27.
Compared with only 7¢ in 2010, that makes a total for the year of 29¢. That rather low comparative is due to the suspension of dividends for three quarters of 2010 following the Gulf of Mexico spill. The dividend still has a long way to go before it returns to the 14 cents a share that was paid out before the disaster. A better benchmark probably is 2009 when BP paid out 56¢ - so 2011 is still only just over half that figure.
Nevertheless, things appear to be looking up for BP, with reported full year profits at $23.9 billion against a loss of $4.9 billion in 2010. The results put BP's profits well above those of 2009, edging closer to the levels of $25.6bn last seen in 2008.
Year end gearing improved, to 26.0 percent against 27.2 percent previously. That is modest by the standards of many big companies, and it would be interesting to compare this with the US majors. Comforting is that BP intends to reduce the debt ratio even further over time.
Analysts are predicting a dividend payout for 2012 of about 20 cents.
Royal Dutch Shell is paying a final quarterly dividend of US 42¢ going ex dividend on 15 February and payable on 22 March, with the sterling conversion to be announced on 9 March. That makes a total of $1.68, unchanged from 2010.
The only good news from a dividend income investor's perspective was that first quarter dividend for 2012 will be 43¢. That's only a below-inflation 2.4% rise, but at least it is the first increase in the quarterly dividends for three years. Shell has been rather tight on its payouts for some time.
Compared to BP's, Shell's year end gearing was low at 15.3 percent, aided by very strong cash flow in the year. Shell's dividend forecast for 2012 is for a payout of $1.106.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
