Oil Majors Should Cut Dividends, says Aviva Investors

The oil majors need higher commodity prices to cover their current dividends. But might they be better cutting pay-outs to patch up the problems and secure long-term growth?

Aviva Investors 21 April, 2017 | 1:35PM

Morningstar's "Perspectives" series features investment insights from third-party contributors. Here, Giles Parkinson, Global Equities Fund Manager for Aviva Investors, ponders big oil’s dividend dilemma.

It may seem counterintuitive for an equity investor to question the long-term value potential of a group of companies that has paid $192 billion in cumulative dividends since 2012. Yet as oil majors Exxon Mobil (XOM), Chevron (CVX), Shell (RDSB) and BP (BP.) have pressed ahead with lavish distributions, investors have seen their shares in these companies ebb away.

Even if the oil price rose to $60, the majors would need to slash capex to sustain dividends

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Aviva Investors  is Aviva's global asset management business

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