Shareholders set to continue enjoying dividends as BP flounders

3 February 2016

It has been announced that BP will be binning another 7,000 jobs by the end of 2017 amid financials that detail an annual loss of £4.5bn in 2015.

The counterpoint to this is that Bob Dudley, BP group chief executive, said in a statement that, “All of this [medium-term plans for longer-term growth] underpins our commitment to sustaining our dividend and then growing free cash flow and shareholder distributions over the long term.”

What does this mean for the public?

What this means for the majority of people is that their pensions and private investments in trackers won’t be taking as big a hit as they might otherwise do – and considering that BP shares fell 10% on Tuesday, that is a sobering thought.

In fact, this highlights one of the major issues tracking the FTSE100 has, which is that its very much exposed to these huge companies that can grab massive profits one year and then suffer huge loses the next. You can read more about this in our story ‘A lesson from history: how sensible investing could have made you a million.’

In similar news, GlaxoSmithKline, which is looking at a pre-tax loss of £416m this quarter, also stated that its dividend, which offers a yield of around 6%, would be held steady during 2017.

Trackers come out of the closet

On the subject of tracker funds, one of the on-going arguments within certain circles of people is that of passive versus active investing – see ‘Should you invest in tracker funds?’ for more on this.

One blow for active investing supporters is that the EU’s securities regulator is scratching its chin after making the discovery that as much as 15% of actively managed funds are actually hoodwinking investors and simply tracking a stock index.

This means that many people are being completely ripped off, considering that charges for actively managed funds relative to passive ones are extraordinary.

Steven Maijoor, who chairs the European Securities and Markets Authority (ESMA) says : “Investor protection is core to our mission and the preliminary findings raise questions that merit closer analysis.”

However, it must be noted that the ESMA lacks the powers to enforce action itself and can only lean on national regulators.

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