Shares in Royal Dutch Shell (LON:RDSA) have jumped more than three percent in London this morning, as the Anglo-Dutch group announced plans to cancel its scrip dividend which allows the company to make a proportion of its payments to investors in the form of new shares rather than cash. The restoration of the group’s cash dividend marks another signal of the industry’s recovery, following BP’s (LON:BP) share buyback plans.
As of 09:23 GMT, Shell’s share price had rallied 3.09 percent to 2,387.00p, propping up the benchmark FTSE 100 index which currently stands 0.36 percent higher at 7,410.64 points. The oil major’s shares have gained more than six percent this year, as compared with a near four-percent rise in the Footsie.
Shell restores cash dividend
Shell announced in a statement this morning that it was cancelling its scrip dividend programme with effect from the fourth quarter 2017 interim dividend. The cancellation means that the fourth-quarter dividend, as well as future dividends will be settled entirely in cash, rather than the company offering a share-based alternative.
The company, which has been dealing with a strain on its balance sheet due to crude oil prices and the acquisition of BG Group, further increased its outlook for annual organic free cash flow to $25 to $30 billion by 2020, at $60 per barrel.
“We have increased our outlook for organic free cash flow, which has been consistently strong over the past five quarters,” Shell’s chief executive Ben van Beurden commented in the statement, adding that the company had also ‘made significant progress’ with its divestment programme, allowing it to reduce net debt.
Analysts weigh in
“Shell’s overarching priority is to position the company as a world-class investment, underpinned by growth in free cash flow per share” and return on capital, Jason Gammel, an analyst at Jefferies, told Bloomberg. “This strategy update indicates significant progress.”