Shell increases dividend payout to shareholders by 50% and returns £1.4bn in share buybacks as oil prices and profits soar
- Oil group Royal Dutch Shell pays 11 pence share dividend to shareholders
- Group also announced a bumper share buyback program this morning
- The company’s share price rises 4% as oil prices and group profits soar
oil giant Royal Dutch Shell has increased its dividend and has begun to buy back millions of shares from investors after the company broke performance expectations in recent months.
Anglo-Dutch Shell said the buybacks before the end of the year will return around £1.4 billion to shareholders.
The group increased the dividend payment to shareholders from 11 pence per share to 17 pence per share. But the dividend is still a long way from the 34 pence level it was cut to last year.
On the rise: oil giant Royal Dutch Shell has increased its dividend and has started buying back millions of shares from investors
The move comes more than a year after Shell took the almost unprecedented step of cutting its dividend for the first time since World War II amid the coronavirus pandemic.
During the early stages of the pandemic, oil prices plummeted. Since then they have risen sharply by more than 150 percent, meaning that millions of Britons are now paying hefty sums of cash to refuel their engines.
Shares of the oil company rose almost 4 percent in early trading on the London stock exchange.
Shell boss Ben van Beurden said: “Today we are increasing our shareholder returns, increasing dividends and starting share buybacks, while continuing to invest in the future of energy.
“The quality of Shell’s operational and financial delivery and the strengthened balance sheet have given the Board of Directors the confidence to reduce the dividend per share to 24 cents from the second quarter of 2021.
“We are also launching $2 billion in share repurchases, which are expected to be completed by the end of this year.
Total shareholder returns for 2021 are expected to be around the middle of CFFO’s 20-30% range of the previous four quarters. Our progressive dividend policy of growing dividends per share by 4% annually, subject to Board approval, remains unchanged.’
Rising prices: Oil prices have risen sharply since the early stages of the pandemic
The group saw oil product sales volume of 4,552 thousand barrels per day for the quarter, up 9 percent from the 4,164 thousand per day achieved in the first quarter. The latest figure is still below the 6,500 thousand barrels per day achieved in the pre-pandemic second quarter of 2019.
Shell’s adjusted profit reached just over £4 billion in the second quarter of the fiscal year, more than eight times last year’s levels.
Stuart Lamont, investment management at Brewin Dolphin, said: ‘Royal Dutch Shell’s balance sheet has strengthened due to continued higher oil prices. period last year.
While the increased shareholder returns in the form of a higher dividend and share repurchase program will be a welcome incentive for investors in the near term, Shell will need to continue to focus and invest more in the transition to net zero in order to remain relevant for the long term. term – a difficult balancing act to remain attractive to shareholders.’
Keith Bowman, an analyst at Interactive Investor, said: “All in all, the poor outlook at the start of the pandemic forced Shell to realign its finances, with about $20 billion withdrawn from its spending, including the first cut in the last year’s dividend since World War 2. Asset sales and a refocus on low-carbon energy arenas have set the tone for the company’s transition.
“But an oil price increase of more than 150% since the pandemic trough in March 2020 has boosted cash flows and reduced net debt to its former target of $65 billion.
“As such, and as previously stated, an increase in shareholder returns is now being realized, with the increase in more permanent dividend payments seen by management as an indicator of confidence in the outlook.
“For now, and with analysts estimating fair value in excess of £17, the market consensus view remains very favourable, pointing to a ‘strong buy’.”