Royal Dutch Shell raised its dividend on Thursday, insisting it could afford higher payouts even as the oil and gas company navigated the twin challenges of the pandemic and the shift towards lower carbon energy.
The Anglo-Dutch group said its cash flows and performance gave it confidence to resume paying higher dividends, just months after the company made the first cut to its payout since the second world war.
A lack of clarity on its future capital allocation and payout plans had drawn criticism from shareholders, and since the dividend cut in April, the stock has tumbled to a 25-year low amid a broader malaise in the oil market.
Under plans laid out alongside its third-quarter results on Thursday, Shell said it would increase its dividend 4 per cent to 16.65 cents in the third quarter and annually from now, subject to approval by the board. It had previously reduced its quarterly payout to 16 cents per share from 47 cents.
“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,” said Ben van Beurden, chief executive.
Shell is pursuing a net-zero emissions goal as pressure to tackle climate change mounts, but has been scrambling to come up with an updated corporate strategy before February that satisfies shareholders.
The company, like the entire sector, is seeking to forge a plan for the energy transition while it grapples with an oil price dragged lower by governments’ ongoing efforts to stem the spread of Covid-19.
For the third quarter, net income adjusted for cost of supply — Shell’s preferred profit measure — dropped to $955m. This compared with $4.8bn in the same period a year ago, but still surpassed analysts’ estimates of $146m.
This reflected lower oil and gas prices, weaker refining margins and production volumes compared with the third quarter in 2019 and was only partially offset by lower operating expenses and strong marketing margins.