Shell share price: Earnings seen falling short of declared dividend

Canaccord Genuity sounds note of caution on oil major

Shell share price: Earnings seen falling short of declared dividend

Canaccord Genuity sees Royal Dutch Shell’s (LON:RDSA) earnings falling short of the oil major’s declared dividend for a seventh straight quarter, the analysts have said. The downbeat comments come ahead of the Anglo-Dutch group’s quarter update early next month.

Shell’s share price was steady in yesterday’s session, climbing 0.20 percent higher to 51.31p, and slightly outperforming the broader London market, with the benchmark FTSE 100 index closing 0.06 percent higher at 7,118.54 points. The group’s shares have lost more than two percent of their value over the past year, and are down by more than 10 percent in the year-to-date.

Canaccord Genuity sounded a note of caution on Shell’s B shares yesterday, pointing to the company’s lack of free cash flow and mounting debt pile given its current dividend payouts. While the broker’s analyst Alex Brooks expects the oil major to post a bumper set of first-quarter financials, Shell’s earnings are seen falling short of its declared dividend for a seventh straight quarter, and at the current oil price of $55 a barrel, a sustained lift in profits above its dividend payout is not on the cards in the foreseable future.

So, ‘despite protestations from management to the contrary’ the payout is likely to come back into focus over the course of the year, the analyst said, as quoted by Sharecast, adding that a combination of hardly any free cash flow over the past decade, high levels of debt and asset disposals at an ‘unattractive’ point in the cycle meant that the oil major’s shares shares were at a risk of further downward pressure.

According to MarketBeat, Shell currently has a consensus ‘buy’ rating and an average price target of 2,323.19p. The Anglo-Dutch oil major is scheduled to update investors on its first-quarter performance on May 4.

As of 07:48 BST, Friday, 21 April, Royal Dutch Shell Plc 'A' share price is 2,000.74p.

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