Just after the noon hour on Thursday, BP PLC (NYSE: BP) traded down about 0.3% on the day and the stock’s dividend yield at that price is 6.7%. On Wednesday, the yield was 6.8%.

According to analyst Christopher Knight at Merrill Lynch, that’s “scary high.” His analysis signals that the supermajor oil company’s downstream growth outlook accounts for more than a $10 per barrel drop in the dividend’s breakeven point.

When the company reported first-quarter results in April, downstream (refining and marketing) adjusted pretax profits slipped from $1.81 billion a year ago to $1.74 billion. In its outlook statement, BP said it expects improved industry refining margins to be offset by narrower North American heavy crude differentials and a higher level of turnaround activity. The company’s dividend yield on the day before the results were announced was 6.93%.

Here are Merrill Lynch’s key takeaways from its new analysis:

Our Downstream earnings estimates remain below BP’s (unchanged) 2021 guidance reiterated at yesterday’s investor day.

We believe BP currently pays one of the most challenged Big Oil dividends – requiring Brent above $60/bbl for [free cash flow] coverage… which only falls to $40/bbl by 2021 on full delivery of BP’s outlook for a near doubling in [free cash flow] from Downstream.

The company’s downstream ambitions support a bullish 2021 outlook, according to Merrill Lynch:

BP’s Downstream investor day yesterday provided rich insight into operational and financial stepping stones on the way towards BP’s unchanged 2021 [free cash flow] outlook – which exceeds our estimates as well as consensus projections. We welcome the increased granularity, but await more regular reporting on progress towards BP’s growth targets.

Full delivery of BP’s 2021 Downstream targets would deliver >$10/bbl of BP’s outlook
[F]or organic dividend coverage falling from ~$60/bbl today towards ~$40/bbl in 2021. We leave our estimates as well as PO [price objective] unchanged and maintain our Neutral rating.

BP remains stuck on the “path of pain” longer than most
We believe BP will remain one of the few Big Oils to continue to see gearing increase into 2H17 (we see >30% by year-end without further disposals). Although mostly due to ~$5bn “inorganic” oil spill payments, we reiterate our view that BP will require more steps on the “path of pain”, i.e., dilutive scrip dividends and asset disposals.

[Free cash flow] yield still less attractive than peer group
Our 2018 [free cash flow] yield at <4% compares unfavourably against BP’s peers averaging ~6%. We therefore maintain our preference for [Royal Dutch Shell] (Buy) – which still offers >10% upside to our PO as well as better visibility on how to return to organic [free cash flow] generation by YE17.

Merrill Lynch’s investment rationale:

Within our global Supermajor framework, BP shows a share of production from long life assets at peer group average. We believe outstanding litigation uncertainty in the US has diminished if not fully removed further NPV and liquidity risks. Low oil prices result in significant [free cash flow] shortfalls in 2016, but should improve into 2017 and 2018. In the meantime, BP may strain its financial gearing and / or organic resource replacement – which still leaves the risk of more equity-funded M&A activity.

BP’s shares traded down about 0.3% Thursday afternoon, at $35.26 in a 52-week range of $30.81 to $38.68. The consensus 12-month price target is $37.84.

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