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Shell prepares to reward investors by restoring bigger cash payouts

Royal Dutch Shell introduced its scrip dividend programme in 2015 (Source: Getty)

Oliver Gill: Sunday 26 November 2017 6:14pm

Oil behemoth Royal Dutch Shell has been tipped to dish out more cash to investors as it scraps a programme of paying dividends in the form of shares. Analysts from UBS believe it is a case of “when not if” Shell restores a full cash dividend.

Shell chief executive Ben van Beurden is expected to signal the changes at a London management day on Tuesday.

The oil giant put a scrip dividend programme – where part of the firm’s dividend is paid by issuing new shares – in place in 2015 to reduce demands on cash as debt spiralled. Shell’s cash reserves were put under pressure by a combination of soft oil prices and a £47bn deal to buy gas producer BG.

“We firmly believe a scrip dividend without full anti-dilution is not consistent with a ‘world class investment’,” wrote UBS analyst Jon Rigby.

Good progress has been made on organic free cashflow generation required to sustain the dividend and there may be positive updates. Debt has been reduced but is tantalisingly short of the 20 per cent gearing [ratio of debt to earnings] level referenced by the company.

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