Low Oil = Low Royal Dutch Shell plc (RDS.A), BP plc (BP) Dividends?

As a result of the oil price slump, will Royal Dutch Shell plc (ADR) (NYSE:RDS.A) and BP plc (ADR) (NYSE:BP) dividends also decline? Ryan Bransfield, head of dividend research at Markit discusses the possibility in an interview on CNBC.

According to Bransfield, Markit expects Royal Dutch Shell plc (ADR) (NYSE:RDS.A) and BP plc (ADR) (NYSE:BP) to keep their dividend payouts throughout the year. However, he did say that there is a risk presented to dividend payouts if the price of oil continues to fall or maintain its low level.

Nonetheless, Bransfield said that Markit’s report on dividend payments in the U.K. are expected to increase 4.5% this year including exceptional special payments.

“However, the thing to be aware of with this is the risk and it is the concentration risk and dependence on a handful of big payers, two of which is Royal Dutch Shell and BP, and obviously the concerns around sustained low oil price,” he said.

Royal Dutch Shell plc (ADR) (NYSE:RDS.A) and BP plc (ADR) (NYSE:BP) have both come out saying that the situation in terms of their dividends will not change this year, CNBC noted.

“Our expectation at the moment is no change to payments. They have been emphatic. They have emphasized their commitment to the dividend. They have been very focused on reining in spending and asset disposals, propping up the balance sheet,” Bransfield noted.

The risk to the average dividend payment in the market is, he said, Royal Dutch Shell plc (ADR) (NYSE:RDS.A), BP plc (ADR) (NYSE:BP) and other companies in the oil and gas industry account for 15% of all dividend payments and should things go wrong with the sector, it will affect the outlook Markit has.

Russell Hawkins’ Hawkins Capital owned about 2.97 million Royal Dutch Shell plc (ADR) (NYSE:RDS.A) shares by the end of the third quarter. Also by the end of that period, Richard S. Pzena’s Pzena Investment Management owned about 11.34 million BP plc (ADR) (NYSE:BP) shares.