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BP dividend in the balance

It is believed that the BP board of directors are meeting today to discuss the future dividend plans of the group amid concerns that the US authorities are pushing harder and harder for a US$20 billion escrow fund to cover the cost of the oil spill. Amid this backdrop of ever growing political uncertainty there is speculation that BP will today announce a reduction in the dividend or even a suspension of dividend payments in the short to medium term.

This comes just days after the company's chief executive confirmed that there was sufficient cash flow and sufficient funding available to cover the cost of the cleanup process without impacting upon dividends. However, there is concern that amidst an ever growing environmental crisis it would not go down too well to see shareholders receiving their income as normal. So what impact will this have on the BP share price?

At this point in time it is unclear whether investors will be disappointed with a potential dividend cut or whether indeed the worst-case scenario is already in the price. You could argue that a withdrawal of dividend payments in the short to medium term would further strengthen the company's balance sheet and hopefully allow the company to get back onto an even keel in the future.

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