Wednesday, June 9, 2010

BP's stock price

Felix Salmon has a nice quick discussion of BP and its huge dividend yield.

For my MBA students - this came up in class on Monday night.
Posted by Richard Warr at 5:03 PM
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2 comments:

  1. BP's dividend is actually more complicated than Felix realizes. If one looks at BP's dividend 12-18 months ago, it was yielding in the 8-10 percent range. Using put-call parity with a dividend adjustment with the option and stock price data of that time period showed that the market was expecting a dividend cut as early as a year to a year and a half ago. Since BP at the time had more than enough earnings and cashflow to continue paying the dividend, the market was anticipating some extraordinary event, such as an oil spill, that would reduce the dividend payout.

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  2. Great comment. I also enjoyed checking out your blog. http://misunderstoodfinance.blogspot.com/

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