Royal Dutch Shell (LON:RDSA) has reached a point where it can and should scrap its scrip dividend, Hargreaves Lansdown has said, as reported by Citywire. The comments came as the Anglo-Dutch oil major updated investors on its third-quarter performance, posting a rise in profits, but also unveiling that its cash flow had slowed down during the reported period.
Shell’s share price rose yesterday, adding 3.16 percent to close at 2,434.00p, outperforming the broader UK market, with the FTSE 100 ending the session 0.90 percent higher at 7,555.32 points. The oil major’s shares have added more than 17 percent to their value over the past year, and are up by some eight percent in the year-to-date.
Hargreaves calls for end to scrip dividend
Citywire quoted Hargreaves Lansdown analyst Nicholas Hyett as commenting on Shell’s results, noting that the dividend remained unchanged at $0.47 but that the performance in cashflow was likely to increase calls for management to scrap a scrip dividend policy which “is seeing it issue almost $1 billion of new shares to shareholders every quarter”.
“That can’t come soon enough for us,” he pointed out, adding that the scrip dividend had “served a useful purpose, allowing Shell to maintain its dividend when cash was strapped”.
“But the pressure is easing and issuing shares that are equivalent to over 1% of the company’s market cap on an annual basis is not only diluting existing shareholders but increasing future dividend liabilities as well,” the analyst added.
Other analysts on Shell
Barclays recently reiterated its ‘overweight’ rating on the Anglo-Dutch oil major, valuing the shares at 2,850p, while Macquarie continues to see the company as a ‘neutral,’ with a price target of 2,150p on the stock. According to MarketBeat, Shell currently has a consensus ‘buy’ rating and an average price target of 2,468.18p.