BP has increased its dividend for the third quarter despite falling oil prices and a 19 per cent drop in profits.

The company said the dividend would rise 5.3 per cent to 10 cents a share and that the payout underlined its financial strength and strong cashflow.

Its third-quarter results took a hit from declining oil prices and a sharp drop in income from Russia as Western sanctions on Moscow led to a slump in earnings from its local partner, Kremlin-controlled Rosneft.

BP’s stake in Rosneft has faced scrutiny after Rosneft was caught up in EU sanctions against Russia over the Ukraine crisis.

BP's underlying replacement cost profit for the quarter was £1.86bn, broadly in line with expectations, but down a fifth year-on-year, mostly due to declining oil prices.

Oil companies have seen billions wiped off their stock market values as crude prices dropped over the past four months by 25 per cent to a four-year low near £53 a barrel, due to slowing global demand particularly in China and ample supplies.

The impact of the falling oil prices was nevertheless limited as the third quarter finishes at the end of September.

"Growing underlying production of oil and gas and a good downstream performance generated strong cash flow in the third quarter, despite lower oil prices. This keeps us well on track to hit our targets for 2014," BP chief executive Bob Dudley said in a statement.

During the quarter, BP paid out another £195m related to the fatal Deepwater Horizon oil rig explosion and subsequent massive oil spillage in the Gulf of Mexico.

Profit at BP’s downstream business, which refines and processes oil and gas, more than doubled to £900,000.

BP said it would spend up to £1.2bn less than planned on capital projects this year with the total coming in at about £14bn.