Shell raises dividend and starts $2 billion share buyback

(Bloomberg) — Royal Dutch Shell Plc increased its dividend by nearly 40% and said it will repurchase $2 billion worth of shares, with continued efforts to win back investors as stronger oil prices and a buoyant chemicals market drive profits increased.

The move comes more than a year after Shell cut its dividend by two-thirds. Modest pay increases since then have done little to increase the company’s appeal, with its shares still about 40% lower than pre-pandemic levels despite a full recovery in oil prices.

The major increases in shareholder returns announced on Thursday show a concerted effort to restore the Anglo-Dutch company’s reputation as an ATM among investors.

“Today we are ramping up our shareholder returns, increasing dividends and starting share buybacks,” Chief Executive Officer Ben van Beurden said in a statement. “The quality of Shell’s operational and financial delivery and strengthened balance sheet have given the board confidence.”

Shell will pay a dividend of 24 cents per share for the second quarter, an increase of 38% compared to 17.35 cents in the previous period. That’s still well below the 47 cents per share the company paid out before the pandemic.

The higher payouts are following in the footsteps of its European counterparts BP Plc and Equinor ASA, but with buybacks on a much larger scale for 2021. The entire sector is boosting investor returns as it recovers from a historic downturn caused by the coronavirus pandemic. TotalEnergies SE also said Thursday it will begin share buybacks.

“Shell was ready to show off the money and give it back as the second quarter marked a significant turnaround for demand recovery,” said JPMorgan Chase & Co. in a note. The changes “should make stocks perform well today.”

Shell’s second quarter adjusted net income was $5.53 billion, compared to $638 million a year earlier. That was above the $5.2 billion average estimate in a Bloomberg survey of 15 analysts.

Shell continues to make buybacks after dropping the condition that net debt must fall below $65 billion before shareholder benefits increase. At the end of the second quarter, the company’s net debt was $65.7 billion.

The profit of Shell’s chemicals division was slightly lower than in the first quarter, but still at an all-time high. The unit earned $670 million, a more than threefold increase from a year ago. The chemical industry is booming due to changing consumer habits during the pandemic. ExxonMobil Corp. is expected to perform particularly well thanks to its sizeable petrochemicals division.

(Updates with analyst comments in seventh paragraph.)

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