Tuesday 4 June 2019 10:11 pm

Shell changes tack in expected dividend hike

Royal Dutch Shell today told investors it expects to hike dividends after completing a $25bn (£19.7bn) share buyback by the end of 2020.

The oil giant routinely pays around $16bn back to shareholders every year but has not upped its dividend since 2014, when it rose to $0.47 per share.

Shell said it is on track to meet 2020 targets and has grown organic free cashflow outlook to around $35bn for 2025 with oil at $60 per barrel.

That is higher than the $28bn to $33bn of free cashflow it plans to deliver this year.

It should allow the company to return $125bn to investors via dividends and share buybacks between 2021 and 2025.

“We have reshaped our company with a focus on value and have demonstrated a clear track record of delivering on our ambitious promises made at our management day in November 2017,” said chief executive Ben van Beurden.

“It is the success of our strategy and strength of our delivery today that gives us confidence for the future.”

Deep water, shale and conventional oil and gas will form Shell’s core upstream focus while refining, trading and chemicals will be key downstream themes.

“All this adds up to a forward-looking strategy that ensures Shell is well-placed to continue to deliver a world-class investment case and thrive in the energy transition,” van Beurden said.

Shares in Shell dropped 0.6 per cent to 2,459p as global oil prices have suffered since the beginning of the week.

Brent crude, the international standard, rose just over one per cent today to reach $62 per barrel, but it lags behind its mid-May price high of $71 per barrel.

Prices dropped over worries about US-China trade tensions.

“Ordinarily, you would expect the stock to rally on the back of such an announcement, but the share price is in the red as the underlying oil market is under pressure over concerns about demand,” said David Madden, an analyst at CMC Markets.