| Date | Subject |
|---|
13/12/2020
10:26 | sarkasm: Royal Dutch Shell dividend increases?
In terms of expectations, analysts estimate that Royal Dutch Shell will earn more in the future as demand potentially rebounds thanks to Covid-19 vaccines.
Although analysts expect RDSB to earn just $0.71 per share for FY 2020 due to the pandemic, they expect the company’s earnings per share to recover to $1.34 per share for FY 2021. Things could get even better after that as analysts expect the company to earn $1.99 per share for FY 2022, and $2.37 per share for FY 2023.
If RDSB achieves or even surpasses those earnings numbers for FY 2022 and FY 2023, management could conceivably increase the dividend back to the pre-Covid level of $1.88 per share in FY 2019.
With that said, I don’t think a quick dividend recovery will happen.
Although Royal Dutch Shell’s could theoretically pay the same amount of dividends as they did before the pandemic if earnings recovers by FY 2022–23, management has said they don’t plan to raise the dividend by much. Rather than increase the dividend a lot, they have said they hope to continue to raise it by around 4% in the following years. One reason is that management wants to pay down debt.
As of the third quarter, Shell had $73.5bn in debt and management has said they want to get that number down to $65bn. Once they get the debt down to $65bn, management has said they “will target total shareholder distributions of 20-30% of cash flow from operation“.
Royal Dutch Shell also needs money to transition into green energy. Many green energy projects don’t have as high of a return on investment as traditional giant oil and gas projects. As a result, Shell may have to invest more money to produce the same amount of profit.
Is the stock a buy?
Given that transitions are difficult, I reckon Royal Dutch Shell will face some headwinds in terms of its shift into a more greener energy mix. There could also be a variety of headwinds that make achieving analyst earnings estimates harder as well.
Nevertheless I like management and I believe they can execute. If the company achieves its earnings estimates for the FY 2022/FY 2023, I think there could be upside. I’d buy Royal Dutch Shell shares at current prices and hold for the long term.
The Motley Fool UK
|
03/12/2020
08:12 | the grumpy old men: Royal Dutch Shell plc Royal Dutch Shell Plc Third Quarter 2020 Euro And Gbp Equivalent Dividend Payments
03/12/2020 7:00am
UK Regulatory (RNS & others)
TIDMRDSA TIDMRDSB
The Hague, December 3, 2020 - The Board of Royal Dutch Shell plc ("RDS")
today announced the pounds sterling and euro equivalent dividend
payments in respect of the third quarter 2020 interim dividend, which
was announced on October 29, 2020 at US$0.1665 per A ordinary share ("A
Share") and B ordinary share ("B Share").
Dividends on A Shares will be paid, by default, in euros at the rate of
EUR0.1386 per A Share. Holders of A Shares who have validly submitted US
dollars or pounds sterling currency elections by November 27, 2020 will
be entitled to a dividend of US$0.1665 or 12.48p per A Share,
respectively.
Dividends on B Shares will be paid, by default, in pounds sterling at
the rate of 12.48p per B Share. Holders of B Shares who have validly
submitted US dollars or euros currency elections by November 27, 2020
will be entitled to a dividend of US$0.1665 or EUR0.1386 per B Share,
respectively.
Euro and pounds sterling dividends payable in cash have been converted
from US dollars based on an average of market exchange rates over the
three dealing days from 30 November to 2 December 2020.
This dividend will be payable on December 16, 2020 to those members
whose names were on the Register of Members on November 13, 2020.
Taxation - cash dividend
Cash dividends on A Shares will be subject to the deduction of Dutch
dividend withholding tax at the rate of 15%, which may be reduced in
certain circumstances. Non-Dutch resident shareholders, depending on
their particular circumstances, may be entitled to a full or partial
refund of Dutch dividend withholding tax.
If you are uncertain as to the tax treatment of any dividends you should
consult your tax advisor.
Note
A different currency election date may apply to shareholders holding
shares in a securities account with a bank or financial institution
ultimately holding through Euroclear Nederland. This may also apply to
other shareholders who do not hold their shares either directly on the
Register of Members or in the corporate sponsored nominee arrangement.
Shareholders can contact their broker, financial intermediary, bank or
financial institution for the election deadline that applies.
|
29/10/2020
07:50 | waldron: Earnings
Oil major Shell increases dividend as third-quarter earnings beat forecasts
Published Thu, Oct 29 20203:16 AM EDT
Updated 13 Min Ago
Sam Meredith
@smeredith19
Key Points
Shell said it would raise its dividend to shareholders by around 4% to 16.65 U.S. cents for the third quarter of 2020 and on annual basis going forward, subject to Board approval.
It comes around six months after the oil major reduced its dividend for the first time since World War II, following a dramatic slide in oil prices amid the coronavirus crisis.
Shares of Shell are down more than 61% year-to-date.
LONDON — Oil giant Royal Dutch Shell on Thursday reported better-than-expected third-quarter earnings and announced plans to increase its dividend to shareholders.
The Anglo-Dutch company reported adjusted earnings of $955 million for the three months through to the end of September. That compared with a net profit of $4.77 billion over the same period a year earlier, and adjusted earnings of $638 million for the second quarter of 2020.
Analysts at Refinitiv had expected third-quarter net profit to come in at $594 million for the third quarter.
Shell said it would raise its dividend to shareholders by around 4% to 16.65 U.S. cents for the third quarter of 2020 and on annual basis going forward.
It comes around six months after the oil major reduced its dividend for the first time since World War II, following a dramatic slide in oil prices amid the coronavirus crisis.
“Our sector-leading cash flows will enable us to grow our businesses of the future while increasing shareholder distributions, making us a compelling investment case,” Ben van Beurden, CEO of Royal Dutch Shell, said in a statement.
“The strength of our performance gives us the confidence to lay out our strategic direction, resume dividend growth and to provide clarity on the cash allocation framework, with clear parameters to increase shareholder distributions.”;
Shares of Shell are down more than 61% year-to-date.
|
08/9/2020
07:31 | sarkasm: Royal Dutch Shell plc Royal Dutch Shell Plc Second Quarter 2020 Euro And Gbp Equivalent Dividend Payments
08 September 2020 - 07:30AM
Dow Jones News
Print
Share On Facebook
TIDMRDSA TIDMRDSB
The Hague, September 8, 2020 - The Board of Royal Dutch Shell plc
("RDS") today announced the pounds sterling and euro equivalent dividend
payments in respect of the second quarter 2020 interim dividend, which
was announced on July 30, 2020 at US$0.16 per A ordinary share ("A
Share") and B ordinary share ("B Share").
Dividends on A Shares will be paid, by default, in euros at the rate of
EUR0.1353 per A Share. Holders of A Shares who have validly submitted US
dollars or pounds sterling currency elections by August 28, 2020 will be
entitled to a dividend of US$0.16 or 12.09p per A Share, respectively.
Dividends on B Shares will be paid, by default, in pounds sterling at
the rate of 12.09p per B Share. Holders of B Shares who have validly
submitted US dollars or euros currency elections by August 28, 2020 will
be entitled to a dividend of US$0.16 or EUR0.1353 per B Share,
respectively.
Euro and pounds sterling dividends payable in cash have been converted
from US dollars based on an average of market exchange rates over the
three dealing days from 3 to 7 September 2020.
This dividend will be payable on September 21, 2020 to those members
whose names were on the Register of Members on August 14, 2020.
Taxation - cash dividend
Cash dividends on A Shares will be subject to the deduction of Dutch
dividend withholding tax at the rate of 15%, which may be reduced in
certain circumstances. Non-Dutch resident shareholders, depending on
their particular circumstances, may be entitled to a full or partial
refund of Dutch dividend withholding tax.
If you are uncertain as to the tax treatment of any dividends you should
consult your tax advisor.
Royal Dutch Shell plc
ENQUIRIES:
Media:
International +44 (0) 207 934 5550
Americas +1 832 337 4355
|
02/8/2020
07:43 | sarkasm: BP's prized dividend faces chop after Covid triggers £5.2bn loss
BP is scheduled to unveil half-year figures on Tuesday
City analysts said BP could cut or shelve its payout alongside the figures
By Ben Harrington For The Mail On Sunday
Published: 22:31 BST, 1 August 2020 | Updated: 23:02 BST, 1 August 2020
BP is being widely tipped to slash its £6.7billion dividend this week.
The FTSE 100-listed oil giant, which is run by Bernard Looney, is scheduled to unveil half-year figures on Tuesday.
City analysts said BP could cut or shelve its payout alongside the figures, which have been forecast to show a $6.8billion (£5.2billion) loss in the second quarter of this year.
City analysts said BP could cut or shelve its payout alongside its half year figures on Tuesday
Colin Smith, an analyst at Panmure Gordon, said: 'We now expect BP to cut its dividend... with the second quarter results.'
Analysts at Quest, the cash flow specialist division of Canaccord Genuity, have also placed BP on its 'dividend at risk' list.
BP generates the largest dividend payments amongst the FTSE 100 blue chip stocks. Both private investors and big City pension funds and institutions would be upset by the cut.
Small shareholders in particular rely on companies such as BP for income in retirement – especially as bank savings accounts now generate almost zero returns.
The potential reduction of BP's dividend comes after Royal Dutch Shell cut its payout for the first time since the Second World War.
Shell's dividend was slashed by 66 per cent – from $15billion last year to $5billion this year. The move came after the oil price crashed following a massive row between Saudi Arabia and Russia.
At one point in April, the oil price in the US fell below zero for the first time in history.
Ben van Beurden, Shell's chief executive, said the 'monumental' decision to reset the company's dividend earlier this year was difficult but necessary to preserve the financial resilience of the company against the crisis of 'uncertainty'.
BP, though, opted not to cut its dividend, which at the time surprised many City analysts and investors.
Analysts expect BP will next week unveil a $6.8billion loss for the second quarter. During the same period last year, it generated a $2.8billion profit.
Experts also expect BP to reveal that it will take between $13billion and $17.5billion of non-cash charges following financial blows and exploration write-offs. The latter could total between $8billion and $10billion.
Aside from BP, other FTSE 100 dividends could be at risk this week. Diageo, the Johnny Walker to Smirnoff drinks giant, is also scheduled to announce full-year results which may include a cut in its shareholder payout.
Royal Dutch Shell cut its payout for the first time since the Second World War
The company will come under pressure to reduce the dividend after the closure of pubs and hospitality venues for months due to lockdown hammered its sales. Last year, Diageo handed shareholders £1.6billion in dividends.
The total amount of dividends paid out by British firms is expected to halve this year as companies look to preserve cash.
Some of the most reliable dividend payers including BT and HSBC have slashed their payouts.
Research by investment firm Octopus Investments found many income-focused fund managers have already removed BP from their portfolios over fears for the dividend.
The proportion of equity income funds that include BP dived from 61 per cent in January to 43 per cent by the end of May.
|
04/5/2020
11:30 | la forge: Four of the UK’s 10 biggest dividend payers have cut or frozen payments: will the rest follow suit?
by Kyle Caldwell from Money Observer | 4th May 2020 09:45
We review whether the other big six income stocks will join Royal Dutch Shell and UK banks in cutting or suspending dividend payments.
Royal Dutch Shell has become the fourth member of last year’s top 10 UK dividend payers to reduce income payments to UK investors.
The oil major cut its dividend for the first time since the Second World War in a bid to put the business on a more resilient footing, following collapse in the oil price following the outbreak of coronavirus.
Its decision to cut the dividend was undoubtedly a difficult decision to make; however, that decision was taken out of the hands of management at fellow top-10 dividend payers HSBC, Royal Bank of Scotland and Lloyds Banking Group.
The country’s biggest banks, in a series of co-ordinated statements at the start of April, announced that they would temporarily suspend dividend payments and share buybacks for both their 2019 and 2020 financial years, following talks with the Bank of England. The suspensions were made to put banks in a better position to support the economy during the current uncertain climate.
Will the other six members of the top 10 UK dividend payers, which accounted for 64% of total dividends for the UK market in 2019, follow suit?
Of the top three payers, Royal Dutch Shell and HSBC will be leaving income investors feeling short-changed in 2020, but the same cannot be said for BP.
The oil major, which updated the market two days before Royal Dutch Shell announced its cut, has raised its dividend for the first quarter of the year to 10.5 cents a share, up from 10.25 cents a share. It did so against the backdrop of a slump in its underlying profits, down by two-thirds in the first quarter of 2020 versus the same quarter a year earlier. The second quarter payment, though, is far from guaranteed. Its dividend yield is just over 10%.
Also providing recent market update was GlaxoSmithKline, the sixth biggest dividend payer in 2019. It has opted to keep its dividend payment flat at 19p per share for the first quarter. Its dividend yield is 4.5%.
Fellow pharmaceutical giant AstraZeneca, the ninth biggest UK income payer in 2019, has a lower dividend yield of just under 3%, but is viewed as being stable as the firm has produced slow and steady dividend growth over the past decade.
Another top 10 member expected to retain dividend payments is British American Tobacco. Being highly cash-generative, tobacco companies tend to pay reliable dividends. In a recent statement the firm was bullish, stating there has been little impact on consumer demand for its products following coronavirus. As a result, the firm said its dividend will grow in sterling terms.
Elsewhere, the two mining members of the top 10 are continuing to pay dividends in the short term: Rio Tinto and BHP Group. Mining, of course, is a highly cyclical sector, so there are serious question markets over whether dividends will be maintained. But in 2019 the sector produced the greatest source of dividend growth, with both Rio Tinto and BHP Group paying special dividends, having sold assets and strengthened balance sheets over the previous couple of years.
Earlier this year, ahead of coronavirus escalating to a global pandemic, Michael Kempe, chief operating officer at Link Market Services, cautioned that 2020 looked likely to record for the worst dividend growth rate in five years.
This forecast stemmed from the fact that the UK market had become reliant on the ability of mining companies to increase dividend payments as less than half of the 15 highest dividend payers in 2019 announced a higher dividend than in 2018.
He added: “If anything, another strong performance from the mining sector (in 2019) highlights how UK dividend growth is precariously reliant on eye-catching increases from two or three big companies in a highly cyclical industry.
“It’s worth remembering that just four years ago, the mining sector slashed payouts by half to cope with a commodities downturn.”
This article was originally published in our sister magazine Money Observer
|
09/3/2020
08:42 | grupo: The Hague, March 9, 2020 - The Board of Royal Dutch Shell plc ("RDS")
today announced the pounds sterling and euro equivalent dividend
payments in respect of the fourth quarter 2019 interim dividend, which
was announced on January 30, 2020 at US$0.47 per A ordinary share ("A
Share") and B ordinary share ("B Share").
Dividends on A Shares will be paid, by default, in euros at the rate of
EUR0.4193 per A Share. Holders of A Shares who have validly submitted US
dollars or pounds sterling currency elections by February 28, 2020 will
be entitled to a dividend of US$0.47 or 36.40p per A Share,
respectively.
Dividends on B Shares will be paid, by default, in pounds sterling at
the rate of 36.40p per B Share. Holders of B Shares who have validly
submitted US dollars or euros currency elections by February 28, 2020
will be entitled to a dividend of US$0.47 or EUR0.4193 per B Share,
respectively.
Euro and pounds sterling dividends payable in cash have been converted
from US dollars based on an average of market exchange rates over the
three dealing days from 4 to 6 March 2020.
This dividend will be payable on March 23, 2020 to those members whose
names were on the Register of Members on February 14, 2020.
Taxation - cash dividend
Cash dividends on A Shares will be subject to the deduction of Dutch
dividend withholding tax at the rate of 15%, which may be reduced in
certain circumstances. Non-Dutch resident shareholders, depending on
their particular circumstances, may be entitled to a full or partial
refund of Dutch dividend withholding tax.
If you are uncertain as to the tax treatment of any dividends you should
consult your tax advisor.
|
05/2/2020
14:15 | waldron: Royal Dutch Shell: No Need To Worry Over Proven Reserve Life And Dividend Remains Safe Despite Soft Fourth Quarter Results
Feb. 5, 2020 8:57 AM ET |
About: Royal Dutch Shell plc (RDS.A), RDS.B
Daniel Thurecht
Daniel Thurecht
Long-term horizon, contrarian, oil & gas, industrials
(2,246 followers)
Summary
Unfortunately for shareholders in Royal Dutch Shell, results for the fourth quarter of 2019 were quite soft and thus saw their share price sink near 5% at one point.
Although their shrinking reserve life is not an ideal situation, there are two main reasons why this is not as concerning as it may initially appear.
Management is taking sensible actions with their capital allocation through keep capital expenditure low and slowing their share buybacks.
These steps should help ensure their cherished dividend payments continue well into the future, although their prospects for future dividend growth is minimal at the moment.
Introduction
Recently the European oil and gas giant, Royal Dutch Shell (RDS.A) (RDS.B), reported results for the fourth quarter of 2019. Unfortunately for shareholders these results saw net income fall 83% year on year and thus were not received particularly well by the market, sending the share price down nearly 5% at one point. This article provides my commentary on several key topics and the outlook for shareholder returns.
Reserve Life
One concerning aspect that has been mentioned was their sixth consecutive decline in their proven oil and gas reserve life, which now stands at only approximately eight years. Whilst this is certainly not an ideal situation, there are a couple of reasons why it is not as alarming as stating that their “…status quo on reserves would put it out of business in eight years” indicates.
The first reason being that this assumes a zero reserve replacement ratio, which history indicates is very unlikely to eventuate. During the last three years their reserve replacement ratio has on average been 48% or 90% if the impacts of acquisitions and divestitures are excluded. If an investor assumes the lower reserve replacement ratio of 48% will continue going forward, this indicates that their reserves would actually last approximately twice as long. Naturally the thought of their reserves actually lasting sixteen years does not sound nearly as alarming and thus indicates they have considerably more time to address this issue. Whilst their future reserve replacement ratio may differ, considering this occurred during a period of industry wide reduced exploration expenditure and was heavily impacted by divestitures, it seems realistic to assume that this could continue at least in the medium-term.
Personally I believe their reserve replacement ratio that excludes the impacts of acquisitions and divestitures is a more suitable way to view their performance as inorganic decisions such as these can work in either direction, which leads into the second reason. Providing they maintain a strong financial position and thus access to capital markets they should be able to acquire reserves in the future as necessary or alternatively further diversify their earnings into other areas, such as renewable energy.
Cash Flows, Capital Expenditure Guidance & Dividend Coverage
Although the headline figures indicating that their operating cash flow decreased from $22.021b in the fourth quarter of 2018 to only $10.267b for the equivalent time period of 2019 sounds dramatic on the surface, the underlying situation was not nearly as severe. If the impacts of working capital changes are removed from both results, their operating cash flow only decreased slightly from $12.9b to $12.3b.
Considering the pressure they are currently facing from not only weak oil and gas prices but also downstream margins, it was reassuring to see capital expenditure guidance towards the lower end of their $24b to $29b range. This is a positive indicator for their capital allocation as it should strike an appropriate balance between ensuring their financial position remains healthy without underinvesting in their future.
Their dividend coverage for the fourth quarter of 2019 was not particularly strong with their operating cash flow of $10.267b only leaving $2.307b for dividends after paying for capital expenditure, investments in joint ventures and associates, net interest expense and dividends to non-controlling interests. This only provided dividend coverage of 61.93% as their dividend payments of $3.725b left a shortfall of $1.418b, however, due to divestitures totaling $2.081b this shortfall was not funded through debt. Whilst this quarter was not stellar, I still maintain that their dividend remains safe as was further discussed in one of my previous articles. Nevertheless their share buybacks totaling $2.848b where clearly partly funded through debt, which as subsequently discussed are being reduced in the short-term.
Future Buyback Outlook
The next tranche of their share buybacks to is be completed by the 27th April 2020 and will not exceed $1b, which is significantly less than the $2.848b that were repurchased during the fourth quarter of 2019. When considering the current macroeconomic backdrop it should come as little surprise that they are slowing the pace of their share buybacks. This indicates that management is making sensible capital allocation decisions that should help ensure their financial position remains secure and thus their cherished dividend payments continue flowing even if times get tougher.
Future Dividend Outlook
Given the current gloomy situation for their underlying commodities as well as their desire to further deleverage and complete their share buyback program, it seems safe to assume that their dividend will be remaining static for a while longer. Considering their dividend yield sits at virtually 7% as of the time of writing, this is not necessarily problematic as going forward shareholders can theoretically still earn a modest return in this low interest rate world even if their share price only trends sideways.
Conclusion
The softness of their earnings should have been mostly expected given the underlying industry conditions that they unfortunately have zero control over. Thankfully it appears that their management is making sensible capital allocation decisions to ensure their core business and cherished dividend payments continue well into the future. Although as a shareholder I would naturally prefer to see stronger results, volatility is par for the course in this industry and thus nothing contained within these results causes me to alter my bullish rating.
Notes: Unless specified otherwise, all figures in this article were taken from Royal Dutch Shell’s Fourth Quarter 2019 report, all calculated figures were performed by the author.
|
01/1/2020
18:43 | waldron: waldron
1 Jan '20 - 18:13 - 8762 of 8768 Edit
0 0 0
chinahere
1 Jan '20 - 18:06 - 8761 of 8761
0 0 0
If it states the RDSA will receive their assets first in a bankruptcy, surely it would be calculated only as a percentage of final assets, so RDSB holders will still follow with the same per-share assets eventually wouldn't they?
My old china where does it say that, you gotta link, cause i am still suffering from
excessive festive celebrating, not to mention there is little sign of bankruptcy risk
kindly clarify
chinahere
1 Jan '20 - 18:15 - 8763 of 8768
0 0 0
I just searched on Google and got this:
Http://www.differencebetween.net/business/difference-between-rdsa-and-rdsb/
waldron
1 Jan '20 - 18:17 - 8764 of 8768 Edit
0 1 0
chinahere
1 Jan '20 - 18:15 - 8763 of 8763
0 0 0
I just searched on Google and got this:
Http://www.differencebetween.net/business/difference-between-rdsa-and-rdsb/
Difference Between RDSA and RDSB
• Categorized under Business | Difference Between RDSA and RDSB
RDSA vs RDSB
Royal Dutch Shell is a company that is associated with oil and gas. It has global operations with its headquarters in The Hague, Netherlands and has a registered office in London, United Kingdom. As a company, it is often referred to simply as Shell. In the present, it is the second largest energy company in the world and fifth largest company overall. As a gas and oil company, its activities include exploration of gas and oil reservations, production, refining, and distribution of oil around the globe. It is also a company that dabbles in petrochemicals, power generation, and trading. With the current trend of renewable energy in response to climate change, the company has been involved in biofuels, hydrogen, solar and wind power.
As a business, the company is registered in the stock market as RDSA and RDSB. These are the classifications of shares wherein each share is a share of the company. Both shares have identical rights but have different characteristics. For example, RDSA is associated with the original Royal Dutch Shell Company. It is Dutch listed and complies with the Dutch tax system. For people who have these kinds of shares, there is a Dutch withholding tax on the shares divided on the rate of 15-25 per cent. This is in accordance with the Divide Access Mechanism that the company imposes on its company shares.
Also, the default currency to pay the dividends is in Euros, the currency adopted by the Dutch government.
Both RDSA and RDSB shares are traded in three stock exchange centers – London, Amsterdam, and New York.
The RDSA shares also have control of the 57 per cent of the company. The shareholders do not have voting power in the company, but they receive the assets before the other shareholders of RDSB in case of a bankruptcy.
On the other hand, the shareholders of RDSB are associated with Shell Transport and Trading, the company’s shipping arm which is based in London, United Kingdom. Since Shell Transport and Trading is a company in itself, thus it is listed as a United Kingdom company and has shareholders of its own. As a British company, it is under the tax system of the United Kingdom. With respect to the Divide Access Mechanism of the company, these shares don’t have withholding tax since these shares are U.K.-sourced dividends. The company should prove to the Dutch tax inspectors that these shares are sourced directly from U.K. income.
RDSB controls the remaining 43 per cent of the company’s total shares and pays in pound sterling (the U.K.’s currency) when it comes to pay dividends. Also, shareholders of RDSB have voting power in the company but cannot receive assets until the RDSA shareholders get their share of the assets in a bankruptcy scenario.
Summary:
1.RDSA and RDSB shares differ in the location where they are listed – RDSA is formerly of the original Royal Dutch Shell Company of the Netherlands while RDSB is previously associated with Shell Transport and Trading, a U.K.-based company and a subdivision of Royal Dutch Shell.
2.At the present, the RSDA has a higher percentage of the company with 575 while RDSB controls only 43 per cent.
3.RDSA is listed in the Netherlands with a withholding tax on dividends of 15-25 per cent while RDSB is a U.K.-sourced dividend under the company’s Divide Access Mechanism.
4.The default currency to pay dividends for RSDA is the Euro (the Dutch currency) while the pound sterling (the U.K.’s currency) is for the RDSB.
5.RDSA shareholders have no vote but have immediate access to assets in case of a company bankruptcy while RDSB shareholders have voting power but have to wait for their assets in the same scenario.
Read more: Difference Between RDSA and RDSB | Difference Between Http://www.differencebetween.net/business/difference-between-rdsa-and-rdsb/#ixzz69nvw6kAn
chinahere
1 Jan '20 - 18:19 - 8765 of 8768
0 0 0
Yes that is better - how do you add links please?
waldron
1 Jan '20 - 18:23 - 8766 of 8768 Edit
0 1 0
START ANY LINK WITH CAPITAL H
|
25/8/2018
12:23 | adrian j boris: Will Royal Dutch Shell Follow Its Peers And Raise Its Dividend?
Aug. 25, 2018 1:57 AM ET|
24 comments
|
About: Royal Dutch Shell plc (RDS.B), RDS.A
Aristofanis Papadatos
Aristofanis Papadatos
Oil & gas, portfolio strategy, value
Aristofanis Papadatos
(3,851 followers)
Summary
Royal Dutch Shell has not cut its dividend since World War II and is currently offering a 5.6% dividend yield.
The oil major has frozen its dividend for 18 consecutive quarters.
The big question is whether it will raise its dividend amid excessive free cash flows and a brightening outlook of the oil sector.
Royal Dutch Shell (NYSE:RDS.A) (NYSE:RDS.B) is an oil giant that has benefited from the rally of the oil price in the last 12 months, just like its peers. However, the oil major has paid the same dividend for 18 consecutive quarters, as it froze its dividend at the onset of the downturn of the oil market that began in 2014. Therefore, the big question is whether the company will raise its dividend in the upcoming quarters.
Dividend record
Despite the downturn that began in 2014, Exxon Mobil (XOM), Chevron (CVX) and Total (TOT) have continued to raise their dividends, albeit at a low single-digit rate. BP (BP) followed the same path as Shell and froze its dividend for 15 consecutive quarters, but eventually raised it in the running quarter, thanks to the strength of the oil price and the brightening outlook of the oil market. Therefore, Shell is the only oil major that has kept its dividend flat for such a long period.
While Shell is not a dividend aristocrat, it has an exceptional dividend record. To be sure, it has not cut its dividend since World War II. This degree of consistency is extremely rare, particularly for a cyclical stock, and is a testament to the strength of its business model and its execution.
On the other hand, Shell has remarkably slowed its dividend growth rate in the last decade, as it has raised it at an average rate of only 2.7% per year. This rate is much lower than that of its American peers. Nevertheless, the current 5.6% dividend yield of Shell is much higher than the 4.1% and 3.8% yields of Exxon and Chevron, respectively. If Shell resumes raising its dividend, it will have a much more attractive dividend than its American peers.
Free cash flows
Just like the other oil majors, Shell is highly leveraged to the oil price. Consequently, when the oil price began to plunge in 2014, the upstream segment of Shell, which used to generate the vast majority of its total earnings (~90%), saw its earnings collapse. As a result, the earnings of Shell in 2015 and 2016 came out 87% and 75% lower, respectively, than those in 2014. In addition, the free cash flows of the company plunged and hence they were insufficient to fund its dividend.
However, thanks to the production cuts of OPEC and Russia, and the drastic investment cuts of all the oil producers during the downturn, the oil market has eliminated its supply glut and has become much tighter this year. As a result, the oil price has enjoyed a strong rally since last summer and is now trading near a 3.5-year high. This rally has resulted in a great rebound of the free cash flows of Shell, which have bounced from -$1.5 B in 2016 to $14.8 B in 2017 and $8.9 B in the first half of this year. Hence the free cash flows of Shell have increased so much that they can easily cover the approximate $13 B in annual dividends. It is remarkable that Shell recently surpassed Exxon in annual operating cash flows ($35.7 B vs. $30.1 B) for the first time in about two decades.
Moreover, thanks to the recent fierce downturn of the oil sector, Shell has greatly improved its efficiency. It has reduced its operating expenses by 35% in the last four years while it has focused on investing in high-quality oil reserves, with markedly low breakeven prices. Furthermore, the company expects more than 700,000 barrels/day from projects that will start up this and next year. Overall, thanks to the strength in the oil price and expected production growth, the management of Shell expects the free cash flows to hover around $30 B per year during 2019-2021.
Such a level can easily cover not only the current dividend but also meaningful hikes in the upcoming years.
Management has noticed the excessive cash flows and recently initiated a 3-year share buyback program worth $25 B. Moreover, it has turned off the scrip dividend and thus it now pays the dividend only in cash, not in shares anymore. These two moves reflect the confidence of management in the brightening outlook of the company. As long as the oil price remains strong, which is the most likely scenario, the next move of the company will be to raise its dividend.
Final thoughts
After a fierce downturn in its sector, Shell has emerged stronger, with its free cash flows reaching all-time high levels. This is an outstanding achievement, as the price of oil is still about 30% lower than it was before the downturn that began in 2014. This performance confirms that Shell utilized the downturn in a highly productive way by cutting its expenses and investing only in high-return growth projects. Thanks to its excessive free cash flows and its exciting prospects, the oil giant has turned off its scrip dividend and has initiated a gigantic buyback program. The next move in its shareholder distribution policy will be to raise its dividend. Investors should expect a dividend hike in the upcoming quarters.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
|
PLUS1
