Updated: January 14, 2016
Most stocks that pay meaningful yields today do so because their stock prices are cheap. Their dividends are being paid from earnings that aren’t there.
Big oil is a big dividend trap. A low payout ratio – the percentage of earnings a company pays out to investors – is generally a good thing. Until that number turns negative, that is.
BP plc (BP) lost $2.49 per share over the last 12 months while stubbornly paying out $2.40 in dividends – for a big yet unsustainable current yield of 7.8%.
How’d it fill the gap? Almost $5 billion in additional long-term debt.… Read more