Will BP's Massive Impairment Charge Pave The Way For a Dividend Cut?
The coronavirus pandemic has not only shaken people's lives but also economies around the world. Global demand destruction for oil and gas products forced Shell (NYSE: RDS.A) (NYSE: RDS.B) to slash its dividend last quarter; the first time it cut its payout in 75 years. After Shell's dividend cut, all eyes are on its top peer BP (NYSE: BP), which may also be forced to follow Shell's footsteps due to its high leverage.
BP expects the demand for oil and gas products to remain weak for a sustained period due to the pandemic. Based on that, the company revised its long-term price assumptions, resulting in an expected impairment charge of $13 billion to $17.5 billion in the second quarter. Do these moves portend a dividend cut? Let's look at some of BP's key metrics to figure out what may lie ahead for its shareholders.
With a debt-to-equity ratio of 0.82, BP's leverage is on the higher side compared to its peers. The massive impairment and write-off charges in the coming quarter will strain the ratio further.
Source Fool.com
