Reuben Gregg Brewer: Jul 22, 2016 at 1:16PM
Royal Dutch Shell (NYSE:RDS-A) (NYSE:RDS-B) has been hit just as hard by the oil industry downturn as any other oil major. So far, though, it’s managed to keep its dividend intact. Still, the company’s cash flow statement bears watching, because keeping that dividend going is getting harder to pull off. Here are two red flags to watch on Royal Dutch Shell’s cash flow statement.
Cash flow, not earnings
Shell’s earnings cratered following the mid-2014 oil price drop, going from around $3.00 a share in 2014 to just $0.60 or so last year. (Note that the U.S. traded ADRs represent two shares of Shell stock, so these figures and all of the other per share numbers in the text, which are based on one share of stock, may be half of what you expect to see if you own the ADR.) In the first quarter of this year, the integrated oil giant only earned about a dime a share. Clearly, things aren’t going well for Shell’s business right now. That’s understandable, since oil and natural gas prices play a big part in the company’s results, but there are implications to the bottom-line decline.