Question

“Assignment Requirements ASSESSMENT ITEM INFORMATION: Assignment Assessment Title”

Nov 29, 2025 | Posted Assignments

“Assignment Requirements
ASSESSMENT ITEM INFORMATION: Assignment
Assessment Title:
Dividends in a Real-world Setting
Aligned to
Course Learning
Outcomes:
This assessment item relates to the following course learning outcomes
2. Interrelate the importance of the dividend decision and the factors that may effect this decision
6. Analyse synthesise and evaluate the outcomes of a detailed financial problem incorporating both collaborative and individual work processes
7. Reflect upon and interpret conclusions communicating them in formats conducive to both audience and purpose.
Purpose and Description
The purpose of this assignment is to assess students capacity to demonstrate their understanding of the dividend decision companies face in a real-world setting.
Assessment Length
1000 words
Assessment Criteria
In the Wall Street Journal on 9 June 2010 in an article titled BP Should Resist Slashing Dividend Liam Denning (for article see the course Blackboard site) noted that BP were under pressure to reduce their dividend payout and perhaps even omit paying a dividend altogether as a result of the oil spill in the Gulf of Mexico. Subsequently BP announced that it would cut its dividend.
Under certain assumptions it may be shown that paying a dividend doesnt make shareholders any better or worse off.
Carefully examine why the reduction in or omission of BPs dividend may harm shareholders.
You will need to ensure that your examination clearly identifies which assumptions from theoretical models may be violated in this instance. Simply stating that the models are wrong is inadequate.
Also your examination should incorporate all of the more recent evidence with respect to the dividend decision. Much of this research is covered in Chapter 11 of the textbook.
You will be assessed on the accuracy of your information and argument and clarity of expression.
Referencing Style:
The Gold Guide is designed to assist you to understand and meeting academic requirements by summarising important points and providing website links. It gives you essential information on the basics of academic writing and critical thinking essay writing referencing business reports presentations and teamwork. The referencing style in the Gold Guide is APA style which is the Faculty standard for Business courses. An electronic copy of the Gold Guide is available.
Article
BP Should Resist Slashing Dividend
By LIAM DENNING
With a presidential boot taking aim at his rear end BP Chief Executive Tony Hayward is being told to throw a punch of his ownstraight to the guts of shareholders.
Reuters
Following Tuesdays letter signed by 31 members of Congress calling for BP to suspend dividends the companys stock yielding 11% now appears priced for a deep cut. Yet there are good reasons why BP should resist these demands at least for now. The consensus estimate for BPs operating cash flow this year is $34 billion. Capital expenditure and acquisitions swallow $28 billion and dividends another $10.5 billion leaving a deficit of $4.5 billion. Even then year-end net debt would be about $31 billion equating to 22% of total capitalization.
BPs target gearing ratio is up to 30% implying extra debt capacity of about $17 billion. That is about the same as the top end of the first years pretax cleanup costs estimated in the Credit Suisse report cited in the congressional letter. So BP can likely handle the costs without touching dividends.
Claims and fines will add to the total liability but will likely be spread over several years. The same Credit Suisse report forecasts 2011 free-cash flow of $3 billion after capex and dividends excluding such claims. Gearing is expected to be 23% by the end of 2013.
When the board meets to decide the dividend in late July it should have a clearer idea of how damage-control efforts are progressing. Moreover it also should have a better view on things like oil prices and refining margins important profit drivers that have faded into the background. If these are weakening then the pressure to conserve cash would increase and rightly so.
Politicians also should ask themselves what a dividend cut would really achieve. Right now the fading hope it will remain untouched is all that stands in the way of yet another sharp correction in BPs share price. Few will weep for shareholders. But that has real effects in terms of BPs ability to fund its operations which are ultimately the bedrock on which expected payouts related to the leak rest.
Politicians have a right to be angry but trying to set BPs dividend policy looks both unnecessary and possibly counterproductive. BP in turn must ask itself what it would gain by giving ground on this score. In todays heated climate it isnt clear a purely symbolic cut would buy much in the way of political benefit. Indeed it might merely encourage demands for more.
Liam Denning
Please mention about Miller and Modigliani analysis and De Angelo and De Angelo analysis