The dividend payment made by a company is among the most important pieces of information to consider when investing in it, being the only sign that accurately reflects what a business really thinks about its health, Woodford claims.
In his latest blog post, he says both BP and Royal Dutch Shell have “unsustainable dividends that are being financed by a combination of debt and asset disposal”, which makes them an unattractive proposition, particularly for a fund seeking to maximise income.
In a contrarian thread, Woordford added: “In effect, these companies are liquidating themselves rather than facing up to the need for a dividend cut.
“The only thing that can save them from that eventuality, in my opinion, is a return to sustainably higher oil prices – something that I think is very unlikely to happen.
“In short therefore, although I know this is a contrarian view because these are widely held shares, particularly by income funds, the oil majors are an unattractive investment proposition while the threat of a dividend cut hangs over them.”
