Citigroup (NYSE:C) analyst Mark Fletcher basically stated today that the idea BP (NYSE:BP) should have to choose between a dividend and paying its liabilities and responsibilities in the Gulf spill is a false dichotomy, as they are well positioned to do both.
Fletcher noted that in spite of the challenges BP faces, they are still very strong financially, with net debt estimated to be about $25 billion.
He said in a note to clients, "BP's net debt is currently estimated around $25 billion. The underlying asset base is worth over $130 billion, excluding any contribution from the U.S. leaving BP solvent even assuming they abandoned the U.S."
Cash flow through 2013 is expected to be $40 billion on an annual basis, giving them a lot of room to maneuver, assuming things aren't taken too far and they're attacked for the purpose of destroying them, rather than taking care of their responsibilities.
With that in mind, the dividend being retained shouldn't be a problem at all, and the idea that it needs to be suspended in order for them to take care of their obligations in the Gulf is one based on faulty data or is just pure demagoguery.
Even if BP temporarily caves on this to make the politicians happy, the dividend yield for the year would still be around 6.8 percent.
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