BP: What today's results mean for the dividend

Oil giant BP's results disappointed and the sterling dividend was down 12% but improvements on costs mean market watchers are increasingly confident about the group's ability to continue to pay a dividend and maybe even increase it in the future.

Elaine Dunphy at Deutsche Bank: Buy

Cash generated from operations in the quarter came to $7.3billion, further reducing gearing to 20% from 21% in both the third quarter and the prior year.

Full year capital expenditure came in at $20 billion and the company indicates it will be around $20 billion in 2010. BP achieved its full year target of $4 billion in cost savings and state that it expects further cost savings in 2010.

All of this is supportive to our expectation for a return to dividend growth at BP.

Richard Griffith at Evolution: Buy

Group cost savings target was achieved and BP expects to continue cost savings in 2010 although no figure was provided.

Critically, BP’s full year cash flow from operations of $27.7 billion was ahead of capital expenditure of $20.3 billion meaning 70% of the dividend is covered, unlike Royal Dutch Shell.

Gearing fell modestly year on year to 20%. BP’s 2010-2012 yield of 6.1% is sector leading and one of the most secure.

Peter Hichens at Panmure Gordon: Sell

The balance sheet proved to be stronger than expected with gearing (net debt/equity plus net debt) standing at 20% compared to 21% in the third quarter 2009.

This was due to stronger than expected cash flow due to lower tax paid when we had expected to see a seasonal increase in payments.