INTERNATIONAL - Royal Dutch Shell set out to woo disgruntled investors by raising its dividend and pledging to grow it steadily, just six months after slashing the payout.
Amid a painful year for Big Oil, the Anglo-Dutch energy giant offered investors some good news. It also reported a larger-than-expected profit for the third quarter, lower net debt and strong cash flow, even as most of its divisions continued to be battered by the coronavirus.
Shell’s dividend for the quarter will increase by 4 percent to 16.65 cents a share and grow annually thereafter, the company said in a statement on Thursday. However, after the deep cut announced in April, the payout is little more than a third of its 2019 level.
“The board is confident we can grow the dividend with 4 percent this year and with similar percentages in years to come,” Chief Executive Officer Ben van Beurden said in a Bloomberg TV interview. Shell is demonstrating that it’s “a compelling investment case,” he said.
Shares of the company rose 1.9 percent to 883 pence as of 8:55 a.m. in London, but are still down about 60 percent this year.
Shell provided a bright spot amid persistent gloom for the oil industry, which is suffering through a historic slump in demand after the pandemic shut down swathes of the global economy. Italy’s Eni SpA and Austria’s OMV AG lost money in the third quarter, while Repsol SA eked out a modest profit.
BP, Shell’s closest peer, posted a surprise profit but gave little indication that shareholder returns would improve after cutting its own payout in August. While van Beurden promised steady growth in cash returns, BP has fixed its dividend and said a resumption of share buybacks is at least a year away.
Shell’s adjusted net income was $955 million in the third quarter, down 80 percent from the same period a year ago, but better than even the highest analyst estimate. Earnings were hit by lower prices for oil and liquefied natural gas, and weaker refining, but that was partly offset by reduced operating expenses and better marketing margins.
The company’s other financial measures also offered some comfort to investors. Gearing, a measure of debt to equity, dropped to 31.4 percent from 32.7 percent in the second quarter. Net debt fell to $73.5 billion, and Shell pledged to further increase shareholder distributions once that figure reaches $65 billion.
Shell has delivered a strong set of results that puts the company “back on the front foot” with investors, RBC analyst Biraj Borkhataria said in a note.
BLOOMBERG