BP shares pricing in 'at least' 50% divi cut, leading investor says

Fund manager Nigel Thomas, manager of the £1.6 billion AXA Framlington UK Select Opportunities, expects BP to cut its next dividend by at least half although he thinks the reduction could be even greater.

Speaking to investors this morning, Thomas said: 'BP's shares are now discounting that the dividend will be cut by at least half but it could be 60 or 70%. [It] won't be able to increase its dividend for a while.'

Thomas said it was almost impossible to value the company at present because it was being treated as a 'political football'. The fact that US oil firms such as Anadarko, Halliburton and Transocean were responsible for up to 25% of the blown-out Macondo well's liabilities had hardly received a mention in the US, he said.

Thomas currently has 1.8% of his £1.57 billion fund in the stock and admits to having been 'lucky' to have been recycling the position into other smaller oil and gas plays just prior to the accident.

'I sold some just before the accident by chance, so I have been a bit lucky to have reduced the position but it is consistent with our multi-cap approach to investing.'

Thomas also told investors that Prudential's proposed bid for AIA had been 'hugely value-destroying', and added that with Pru a 1% position in his fund he would have voted against the deal.

'Even at the reduced cost of $30 billion, the price was still miles too high', he said.

Thomas does not expect to see a double dip in the UK's economy either.

'I don't expect a double dip, but think we will see growth in the UK, whether it is 3%, 2% or 1%. We are not worried but you have to be certain that your companies can get revenue growth or earnings growth otherwise we could go back to 1979 where companies could not grow their dividend.'

Thomas expects the UK market to return to a 'back to basics' stock picking environment.

'I don't see a roaring bull market; it will be very mixed with pockets of delation and inflation.

On the euro, Thomas said he expected it to rise to around €1.25 to the pound in the near term, but described it as a 'misconceived project' from its start.