The company which pays has the biggest dividend payments in England is BP and for the past 100 years has been a very stable company to own. The British Royal family owns shares, but last year in the early stages of COVID, people stopped using their vehicles which led to oil prices falling and oil companies losing money. As the year went on, people started using their vehicles, the price of oil increased and oil companies have reaped the rewards as share prices increased.
In an article by Yadarisa Shabong of Reuters, BP announced it expects to hit its $35 billion net debt target in the first quarter of 2021 which is sooner than expected and can buy back shares.
CEO Bernard Looney said a combination of higher oil prices and the ability to sell assets faster than anticipated is allowing for the change. The buybacks will be in the range of $2 billion a year.
The reason why BP is selling assets is a shift to become a low carbon energy investments and pay down debt.
Linking to dividend paying stocks, many of these companies have tremendous assets which are carried at low book values. When the company decided to exit some businesses, there are assets to be sold which allows the company to pay down debt and change focus. The issue is how profitable are the new assets, relative to the ones they are selling, but sometimes consumers change and it is worthwhile going forward.
There are more questions than answers, till the next time – to raising questions.