ConocoPhillips: The Dividend Isn't Worth The Potential Squeeze

• A bet on ConocoPhillips is a leveraged bet on oil.
• Why there's a good chance the dividend will be cut.
• There are safer plays for a dividend investor looking to put money into an E&P.

I've heard many income investors pitching ConocoPhillips (NYSE:COP) as a great value at its current price and 6.4% dividend (one of the higher yields among large E&Ps). Their analysis relies on two assumptions. First, current oil prices are unsustainable and will soon rebound. Second, ConocoPhillips' dividend is sacred to management and is therefore safe from being cut.I believe these investors have fallen prey to a bit of recency bias and a lot of wishful thinking. Dig into the assumptions and you find that buying ConocoPhillips as a value income play is far from a sure thing - and in fact comes with quite a bit of downside risk.A bet on ConocoPhillips is a bet on the future price of oil.In 2012, ConocoPhillips spun off its downstream business (refining and marketing) into what is now Phillips 66 (NYSE:PSX), making COP a pure upstream E&P company. When this decision was made, oil was trading around the $100 level. It was thought that this move would unlock value for shareholders. But there's a problem.The downside of this split is that it made the company vulnerable to falling oil prices. Integrated oil companies benefit from their downstream businesses because refiners see higher profits when the price of oil falls - acting as a kind of hedge on lower energy prices.Without its downstream business, ConocoPhillips is essentially a levered bet on the future price of oil with a 6.4% yield (that has a high chance of being cut as we'll soon discuss). Compare the company's stock chart to one of oil and the correlation is easy to see. (Keep reading....)