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15/3/2021
10:37 | ariane: ROYAL DUTCH SHELL PLC FOURTH QUARTER 2020 EURO AND GBP EQUIVALENT DIVIDEND PAYMENTS
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March 15, 2021 03:00 ET | Source: Shell International B.V.
The Hague, March 15, 2021 - The Board of Royal Dutch Shell plc (“RDS”) today announced the pounds sterling and euro equivalent dividend payments in respect of the fourth quarter 2020 interim dividend, which was announced on February 4, 2021 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 €0.1396 per A Share. Holders of A Shares who have validly submitted US dollars or pounds sterling currency elections by March 5, 2021 will be entitled to a dividend of US$0.1665 or 11.96p per A Share, respectively.
Dividends on B Shares will be paid, by default, in pounds sterling at the rate of 11.96p per B Share. Holders of B Shares who have validly submitted US dollars or euros currency elections by March 5, 2021 will be entitled to a dividend of US$0.1665 or €0.1396 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 10 March to 12 March 2021.
This dividend will be payable on March 29, 2021 to those members whose names were on the Register of Members on February 19, 2021.
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.
Royal Dutch Shell plc
GlobeNewswire is one of the world's largest newswire distribution networks, specializing in the delivery of corporate press releases financial disclosures and multimedia content to the media, investment community, individual investors and the general public.
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11/3/2021
09:35 | ariane: Shell's profits slump as coronavirus hits oil and gas industry
By BFN News | 07:39 AM | Thursday 11 March, 2021
Royal Dutch Shell suffered a slump in profits in 2020 as the Covid-19 pandemic hit the global oil and gas industry.
The company reported total revenues in 2020 of $180.5 billion, down 47% on 2019's figure of $344.8 billion, a reflection of lower oil prices and reduced production because of hurricanes in the Gulf of Mexico and restrictions put in place by OPEC.
Ben van Beurden, the chief executive officer of Royal Dutch Shell, said: 'The virus also wreaked havoc with the global economy, dramatically suppressing energy demand.
Our income went from $16.4 billion in 2019 to a loss of $21.5 billion in 2020, which included non-cash impairments of $28.1 billion.' He added that in April, with oil prices falling rapidly, Shell took 'swift, decisive action to preserve cash and stay resilient'.
Mr van Beurden said: 'We rebased the dividend, lowering it by 66%.
In October, with global energy demand looking more robust, we raised the dividend by 4% and signalled our intention to have annual dividend increases, subject to Board approval.'
Despite the unprecedented challenges, Shell delivered cash flow from operating activities of $34.1 billion in 2020, compared with $42.2 billion in 2019.
The company has proposed a dividend per share of $0.65 for 2020.
The board of directors has appointed Sir Andrew Mackenzie as the company chair with effect from the 2021 AGM scheduled for May 18, 2021.
Mr Mackenzie will succeed Chad Holiday who will step down on May 18 having served as chair for six years and as a board director since September 2010.
Story provided by StockMarketWire.com
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04/2/2021
22:29 | sarkasm: Don't Sell Shell
Feb. 04, 2021 5:24 PM ETRoyal Dutch Shell plc (RDS.A), RDS.BRYDAFRYDBF1 Comment2 Likes
Summary
Shell's dreadful stock price action in 2020 is coming to an end. All the bad news has been priced in and the stock offers good value now.
Oil fundamentals look supportive but even with flat oil prices, Shell's financials look to be getting stronger, providing strong dividend cover.
The Strategy Day on 11th February could offer a catalyst for investors to reconsider Shell as a serious Energy Transition investment option.
The December 21st trading update from Royal Dutch Shell (RDS.A) largely foresaw the torrid Q4 results and 2020 full year results just released. In a nutshell, 2020 was an exceptionally challenging year for the oil major.
What should Shell shareholders do? While the company is trying to reposition itself for the new energy landscape ahead, the headlines have been consistently bad for the Anglo-Dutch company. Profit warnings, write-downs, collapsing prices for oil, collapsing refinery margins, the first cut in dividends for decades, a falling share price, and finally the departure of several clean energy executives amid internal arguments over its clean energy strategy have all contributed to the bear market in Shell's stock in the last year.
The 36% fall in the stock price over the last year sounds bad, but there is a fundamental truth in oil markets and that is that the cure for low oil prices is low oil prices. That’s why the weakness in the sector, the cutbacks in production and investment will cause higher oil prices going forward, as I have already pitched in a recent Seeking Alpha article on crude oil, that so far is playing out nicely.
The pessimism about Shell, coupled with some positive signs on the horizon and my bullish outlook on oil in fact make Shell a very good contrarian play.
The fact that December’s profit warning did not do much damage to the share price suggests that all the bad news is already priced in and indeed the stock has started to rise over the last couple of months. The Global Investor thinks this recent price action isn’t a dead cat bounce, but the start of a rally back to a fairer, higher price for Shell's stock.
Oil majors have traditionally been core income stocks for many portfolios but after the first dividend cuts in decades last year, when the dividend was cut 66% it has since been raised slightly in October and now been raised again slightly some more. This gives the stock a current dividend yield of about 3.6%. What’s more, Shell is still slashing costs and capital expenditure, like the rest of the oil and gas industry, and US shale output is falling thanks to weak pricing. This suggests low prices will squeeze out uneconomic supply and help oil prices continue their recovery. And with the rollout of vaccination programs, some oil demand lost in 2020 should come back in 2021, further tightening the supply-demand balance towards higher oil prices.
Another contrarian indicator is that the oil and gas industry is now hated by institutional investors, either for financial reasons or for environmental, social and governance - ESG - reasons and this has simply gone too far. The weighting of the Oil & Gas sector in the main stock market indexes is at lows last seen in the 1990s when oil prices ranged from $10-$20 per barrel.
Risks
This brings us to the risks of owning Shell right now. ESG is a new force in the markets, so some investors simply won’t look at Shell for a long time. Long-term oil demand has probably peaked and the switch to renewable sources of energy will be bumpy as the company is finding in its transition efforts to date. Shell also has the risk that it gets stuck with “stranded assets” with its large reserves of oil and gas. This means Shell’s book value is bound to be higher than its market value as investors price in further write-downs to its asset values. Shell has traditionally been a very reliable dividend payer, but the energy transition makes it almost impossible to balance the needs of high dividend payouts with the large investments required in greener energies. While the dividend has been cut deeply to a lower level, investors cannot assume it will rise back to its previous level quickly as the volatility in energy markets and the restructuring needs of Shell will probably dictate otherwise. Indeed, Shell's management has called it a dividend "reset".
The future
It is expected that Shell will outline a radical new strategy at its investor day scheduled for February 11th. The new strategy, likely to focus on clean energy, and to more closely follow BP’s radical restructuring plans that started last year, could appeal to investors who are looking more at the rate of change in ESG factors than in the absolute level of how good a company is on current ESG measures, specifically with respect to climate change and carbon emissions.
Strategy Day on February 11th
Ultimately, The Global Investor expects Shell to try to strike a balance between driving meaningful change towards 'Net Zero' emissions but also to maximize value from existing businesses over the intermediate period. The following are some of the topics I expect Shell to cover in the forthcoming Strategy Day which I expect to help turn market sentiment back towards Shell’s favor.
Net zero by 2050 or earlier – Shell already outlined this target back in April last year but didn’t give much detail and so wasn’t seen as that credible. Shell will probably present its business plan in more detail to get to these targets.
Upstream oil & gas to underpin cash generation. Having made the mega acquisition of gas major BG Group back in 2016, Shell is more committed to oil & gas than BP who have outlined plans to cut production by 40% over the next decade. Given Shell's project pipeline, its portfolio still has some growth potential but during last year’s Q3 results CEO Ben van Beurden said "It’s probably fair to say that 2019 was the high point in terms of oil production". So Shell is probably keen to keep a relatively flat production profile as it looks to sell non-core positions as it uses its Upstream division to act as a key contributor to cash generation over the next decade, through both operations as well as disposals. While this might disappoint ESG investors who argue for more aggressive action, it will keep dividend investors happy as this strategy reduces risks to free cash flow generation.
Strength in natural gas, the bridge fuel. Shell is the world’s largest player in LNG so it’s likely Shell will highlight the role of natural gas as the “transition fuel” helping reduce carbon emissions because of its cleaner properties compared to coal and its vital role in electricity generation. The term "bridge" comes about because natural gas can support renewables over the period where wind and solar still suffer from intermittency issues.
In 2019 Shell said it expected the LNG market to grow at 4% per year over the next few years. Last year management said Shell’s LNG business will not necessarily match the market "percent for percent" which might mean lower capex needs in this division. LNG will remain a key cash generator over the next decade so expect updates on Shell’s LNG outlook on 11th February.
Growth opportunities in hydrogen and biofuels. For renewables, Shell will likely emphasize both hydrogen and biofuels given hydrogen is a natural fit as it is already produced and consumed in Shell’s refining business. Shell already has about 50 hydrogen fueling stations mostly in Germany and California. In biofuels, Shell is one of the largest blenders and distributors globally, partly due to its 50:50 joint venture with Raizen in Brazil.
Shell will likely highlight its expansion in wind and solar, businesses which are getting extremely competitive now. Shell will look to leverage its strong Marketing and Trading positions to sell more electricity to the customers who currently buy fossil fuels from their large global customer networks.
New Energies to account for about 25% of capital expenditure over the next few years. At last year’s 3Q earnings announcement, Shell guided that capex would remain in the $19-22 billion range over the coming years. It gave high level guidance on the breakdown between segments: 35-40% for Upstream, 35-40% for “Transition business”, which includes Integrated Gas, Chemicals and Refining, and about 25% to growth businesses such as Marketing, Power, Hydrogen, Biofuels and carbon capture, utilization and storage with nature-based solutions. The Global Investor expects Shell to update this breakdown and give more detail.
Overall, hydrocarbons will remain part of Shell’s core strategy over the next decade. This gives it less execution risk on restructuring compared to its great rival BP, but makes it more exposed to oil and gas commodity prices.
While ESG investors do play a role at the margin, and maybe a larger role in Europe, The Global Investor still believes the stock market is overall, at least in the long term, amoral. Short term trends matter and ESG has driven investors away from oil & gas but it could also be argued that that’s mostly happened because of weaker financial returns in the sector. If Shell can raise its profits through higher oil prices, Shell can raise its dividends and investors will put a higher valuation on the stock because of higher dividends.
Dividends
So, it comes back to dividends ultimately. That has always been the driver of Shell’s share price. Assuming oil prices at about $50/bbl over the next few years – more conservative than my actual view – I think Shell will generate $13-14 billion in free cash flow each year. At current dividend levels this implies dividend cover of about 2.5x, a very high number for Shell historically. This means Shell's balance sheet will start to de-leverage quickly. Management has indicated that when net debt falls to about $65 billion it will re-start its share buyback program. This could happen around the middle of next year if oil prices hold. Currently, Shell is guiding for 4% dividend growth per year, but there is big upside potential to this number. Before the dividend reset last year, Shell’s dividend had become unstainable given the investment needed in the energy transition.
Valuation
Shell’s dividend yield over the last 10 years had bounced around the 6% level as it was always assumed the dividend was unstainable. After the reset a much lower more sustainable dividend yield would be more like 3.5% or 3.6%. Taking 3.6% to be conservative, and a forecast full year 2022 dividend of $1.39 per share for the “A” class ADRs would give us a stock price of about $39, or about 6% higher than where it is at the time of this writing. While this isn’t massive upside, the dividend yield of 3.6% and dividend growth of 4-5% per year offers us good stability. All this assumes conservative oil price forecasts and gives Shell ample room to de-lever and increase share buybacks or accelerate dividend growth, which should further put a bid on the stock price.
Conclusion
Value investors and income seekers should continue to own Shell. Shell is very likely to always be a “Supermajor221; but with its focus shifting gradually towards energy in general and away from its historical reliance on oil but gas will play a major role for a long period. Energy is a core need in society so Shell is likely to be able to keep its large size and retain its status as a core “income portfolio” position thanks to strong and stable dividends. In the short term, rebounding oil prices should help near term cash flows and hence drive stock price appreciation. A successful investor day on February 11th could help change Shell’s perception amongst the sustainable investment crowd and market sentiment towards companies through lowering the climate / sustainability / reputational risk for institutional investors in owning Shell. This sustainability focus for investors accounts for a very large section of European institutional investors now. So things are improving now and it's likely we've seen the low in the Shell share price. The bottom line is that Shell is worth holding as a small part of your portfolio.
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19/1/2021
16:12 | maywillow: Shell: What It Will Take To Be Investible Again
Jan. 19, 2021 5:15 AM ET|
34 comments
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About: Royal Dutch Shell plc (RDS.A), RYDAF, RDS.B, Includes: XOM
Retirement Pot
Retirement Pot
Long Only, Deep Value, Growth, Foreign Companies
(998 followers)
Summary
Shell's dividend cut and unpredictability last year cost it a lot of shareholder confidence.
I outline three metrics I think show whether it's investable again.
On all three metrics, I continue to see it as uninvestable with confidence.
U.K.-based oil major Shell (RDS.A, OTCPK:RYDAF) didn’t have a great time of it last year when it came to shareholder relations. With its mammoth dividend cut and poor signaling thereof before it was made, a lot of shareholders ditched the holding. I sold my entire stake and reinvested the proceeds in more Exxon Mobil (XOM).
Below, I outline what I think are the key challenges to Shell being investable at this point.
1. Shareholders Need Faith in Management
The single biggest challenge facing Shell’s prospects right now, in my view, is the low quality of its management from an investor’s perspective. The way that the dividend cut was handled was terrible. Shell is a key holding for many U.K. and Dutch holders, including pension funds and the like. So, a 70% cut just a couple of months after guiding investors not to expect a cut is simply not professional at all, in my view. It doesn’t behoove management of as large and economically important a listed company as Shell to behave in this way.
Management lost credibility with many shareholders, and frankly, it was on such a scale that I won’t have faith in current management again, period. I thought the chief executive ought to have done the decent thing and resigned.
But I also don’t see evidence that current management deserves to regain investor confidence even if one isn’t as critical of how they handled the dividend cut. For example, in comments accompanying the third quarter earnings presentation, the finance chief said:
“we re-based our dividend to protect our balance sheet in response to the profound impacts of the pandemic”.
That feels disingenuous to me. A 70% cut on an ongoing basis is not justifiable purely in terms of pandemic impact. The company seems to continue to message its shareholders without respecting their intelligence.
For me, this is the biggest issue at the moment when it comes to the investment case for Shell. Whatever its asset base or strategy, if it doesn’t have appropriately skilled, reliable management, it’s a speculative punt, not an investment.
2. Visibility on Future Earnings Streams
One of the big debates in the energy sector is future demand for oil and gas versus other forms of energy. I’ve set out elsewhere why I don’t think oil demand is going to fall anytime soon, but there are well-considered and very different perspectives across the spectrum of the debate. For an example, I recommend Tudor Invest Holdings’ piece Royal Dutch Shell: More Than Just Oil And Gas.
One approach, which I would say Exxon is taking, is doubling down on the core business of oil and gas. That is a straightforward play on future oil and gas demand and pricing.
An alternative approach is to move to an asset portfolio which over time produces more energy from sources other than oil and gas. Some are more environmentally damaging, in my view (wind turbines, for example), so I don’t use the moniker “green”. The point is, they’re not from oil and gas. A number of – primarily European – energy majors have committed to this approach. While it’s the case for Shell, it is also happening at BP (NYSE:BP), Total (NYSE:TOT) and Equinor (NYSE:EQNR), for example. So, Shell management is basically moving in lockstep with the European energy sector in its approach here, rather than acting independently.
However, in terms of being investable, the question is what this means for future earnings. Exxon’s approach is simple to understand: one needs to look at future demand, pricing and the company’s production volume and costs. While those are all moving parts, it’s fairly easy to construct different models depending on one’s broad thesis about future oil and gas demand.
By contrast, earnings from the sorts of energy sources Shell is getting into now are much harder to forecast. Markets remain heavily subsidized and immature, so the long-term economics are unclear. I set out in my piece Shell And The Myth Of Oil Major Green Energy my concerns that the company’s strategy was slow to execute, with unproven results. That remains the case. In its third quarter earnings, upstream and midstream results both came with financial figures attached. The so-called “growth” business did not.
Shell now sees its upstream energy business as a cash cow to fund its move into other areas, and pay shareholder distributions. This is clear from a slide it shared with its Q3 earnings.
Source: Q3 earnings presentation
That also matches the approach the company management is taking to its oil production. The CEO is reported as saying that Shell’s oil production probably peaked in 2019. So, the company expects to reduce its output of its cash cow product, meanwhile expanding in other areas whose profitability is unproven and unknown.
The key point here is not whether oil demand peaks, factor outside the company’s control. The issue is that the company is proactively planning to move to a product mix, which seems less profitable, and which is likely, therefore, to lead to structurally lower earnings in the long term, notwithstanding fluctuations in the oil price.
3. A Clear Dividend Logic
Shell set out its new, clear dividend policy with its third quarter result: a dividend increase of c. 4% annually, subject to board approval.
Additionally, it set out (as a lower priority) total shareholder distributions of 20-30% of operating cash flow on reaching net debt of $65 billion. Net debt at the end of September stood at around $73.5 bn. Once the debt comes down, these additional distributions could include both share buybacks and dividends.
That means that, at its current price, Shell has a prospective forward yield around 3.5%, which is decent for an FTSE-100 constituent. The cut has also increased dividend cover, something the company highlighted alongside its inaugural 4% increase last year, although it's hard to say for now what the long-term cover is likely to be.
So, there is a dividend policy. But I do not see a solid logic in it. First, why a meaty (4%) raise just months after a 70% cut? I just stole your wallet but, hey, here’s your cab ride home! Longer term, why 4%? It sounds attractive to potential investors. But with oil price movements and the unproven economics of Shell’s future focus, setting out a plan for a consistent annual rise lacks logic.
While the clear dividend policy is welcome, I would like for a clear dividend logic also. Currently, I think it’s missing. That matters because if the dividend keeps growing by 4%, sooner or later (perhaps later), the company will come up against the same challenge it faced last year: how to sustain a payout level which has been rising, if oil prices crash?
Conclusion: I Regard Shell As Uninvestable
I sold my Shell position at a loss and reinvested it in Exxon, because I maintain faith in oil and gas as a long-term investment theme but don’t maintain faith in Shell. For me to consider it as being investable again, it would need to demonstrate that management is capable, it has a plan to sustain or increase earnings in so far as it can do so with the levers it can pull (of which oil price isn’t one) and that the dividend has a logic which doesn’t just run it up for years or decades and then heavily cut it again in future. For now, I consider it to fail on all three metrics.
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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.
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08/9/2020
08:31 | 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
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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
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02/8/2020
08:43 | 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.
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04/5/2020
12:30 | 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
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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.
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01/1/2020
18:43 | waldron: waldron
1 Jan '20 - 18:13 - 8762 of 8768 Edit
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chinahere
1 Jan '20 - 18:06 - 8761 of 8761
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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
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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
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chinahere
1 Jan '20 - 18:15 - 8763 of 8763
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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
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Yes that is better - how do you add links please?
waldron
1 Jan '20 - 18:23 - 8766 of 8768 Edit
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START ANY LINK WITH CAPITAL H
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PLUS1
