Concerns over BP possibly cutting its dividend may see inv-estors look overseas for a more secure level of income, according to advisers.
BP’s share price has fallen by almost 20 per cent in the past month to June 7, 2010 following the Gulf of Mexico disaster.
All three leading ratings agency have now downgraded BP in some shape or form with concerns rife that the oil spill may effect the group’s balance sheet.
According to research from Bestinvest, 63 of 86 UK equity income funds held BP in their portfolio. Senior investment adviser Adrian Lowcock says the concerns around BP highlight dividend issues for UK equity income investors, given what has already happened with the banks.
He says: “The move overseas is a growing trend that we are seeing already. Investors should make sure they have a diversified income stream across bonds and commercial property and should look to ensure their equ-ity income is diversified by going overseas in Europe, Asia and other geographical regions.”
Skerritt Consultants head of investments Andy Merricks says: “It is a concern and fair play to Woodford who has always said dividends in the UK would continue to come under pressure. I would not be surprised if BP cut its dividend and this highlights the concentrated and fragile nature of the sector.
With European, Asian and global income funds growing in number, I think a continued move of income assets overseas is likely.”
Hargreaves Lansdown investment manager Ben Yearsley says: “It may see a small move overseas but don’t forget, it will only have a one-year effect on income so I would not expect too many people invested already to move.”