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Is BP Making The Right Dividend Play?

Shares of BP (NYSE:BP) have settled around the $35 mark in the past month. The oil producer, much like its competitors, has been adamant in maintaining its dividend pay. Even though the oil market remains soft, the company was still able to increase its production. But the company's insistence on paying its shareholders a dividend doesn't help its financial stability. BP isn't alone, however, as other oil producers have taken a similar approach. If oil prices were to stay this low for a long time, it would be highly unlikely for BP to keep its dividend pay unchanged.

Although oil prices remain low, and they aren't expected to pick up anytime soon, BP continues to pay its investors a hefty dividend. The annual yield currently stands at 6.9%. The last time the annual yield was at such a high level was in 2010. The company slashed its dividend payment back then, after suspending the dividend pay in the second half of 2010 following the Gulf of Mexico oil spill. This time, the circumstances aren't as dire as they were back then. Nonetheless, the pressure on BP's cash flow is likely to keep us guessing as to when and if the company will cut the dividend, despite its reassurances to the contrary.

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