- Yet more bumper shareholder returns, this time from oil giant BP
- Asia-focused banks also join the party
For UK investors the theme of dividends has dominated the results season, which remains in full swing this week with a host of majors reporting today. Overall, shares in London are reacting positively, with the FTSE 100 adding another 0.3 per cent by mid morning to trade above 7,100 with the mid cap FTSE250 building further on its record close yesterday as confidence in the domestic UK economy grows. After excitement was stoked yesterday by the multi-billion dollar offer for Meggitt, which also put a rocket under shares of sector peers such as Senior, Melrose Industries and Qinetiq, attention today has switched back to the results season.
BP's bumper payout plan
Among the major traditional dividend payers, the oil majors always feature strongly and especially during times of high and sustained oil prices such as we are seeing right now. Indeed, building on Royal Dutch Shell’s buoyant results last week, today it is the turn of BP (BP.) to publish knock out results decorated with news of increased shareholder distributions. Underlying profits smashed analyst expectations at $2.8bn for the second quarter of its financial year, during which time net debt shrank by $600m to $32.7bn.
More importantly for income investors, BP increased its dividend by 4 per cent and management said it could continue to increase the dividend by that amount each year until 2025 so long as the average oil price remained around $60 a barrel. Management also announced it was committing $1bn to share buybacks in the next quarter and could foresee spending $1bn a quarter on buy backs alongside the growing dividend.
Tellingly for a company which is publicly committed to transforming its operations for a low carbon future, BP today raised its forecast for average oil prices out to the end of the decade but said that beyond 2030 it expects oil prices to fall as the world accelerates its transition to a low carbon economy.
Read Alex Hamer's analysis of BP's results here.
We recently addressed the future of oil in an in depth feature - read more here.
Asia-focused banks benefit
After the bulk of the UK’s domestically focused banks reported earnings last week, this week it is the turn of the more internationally focused HSBC (HSBA) and Standard Chartered (STAN), both of which are predominantly centred on Asia.
Reporting yesterday, HSBC’s profit benefited from write backs of impairments put in during the worst months of the pandemic but investors were generally disappointed with the dividend offered, even though management pledged to increase its dividend payout ratio from 40 per cent to 55 per cent in future years.
Read Julian Hofmann’s results analysis here.
Standard Chartered also benefited from write back of provisions for bad loans to the tune of $1.6bn, which helped boost profits by 41 per cent to $2.7bn, up almost 60 per cent on last year, and allowed management to announce a dividend and a $250m share buy back programme. Chief executive Bill Winters hailed the green shoots of economic recovery across the globe as cause for increased confidence in the Standard Chartered boardroom.
Elsewhere in the world of international banking, Societe Generale reported its best first half performance in five years today. Second quarter net income came in at €1.4bn, compared with a €1.3bn loss at the same stage last year.
Sanofi makes mRNA move
Much has been made during the race for a Covid vaccine of the future potential of mRNA technology for vaccines and other medical treatments. And French pharma giant Sanofi has made its own statement this week with a €3.2bn offer to acquire its partner in mRNA treatment development, Translate Bio. The Boston based company has already partnered with Sanofi on a Covid treatment but this is still in trials and some way behind rivals Pfizer/BioNTech and Moderna which have mRNA based vaccines in millions of arms already.
It is not all about Covid though, Translate Bio is also working on potential treatments for diseases such as cystic fibrosis, cancer and other lung and liver conditions.
With mRNA technology proving highly effective in the race against Covid, focus has sharpened on what pharma companies will look like post the pandemic - a subject Harriet Clarfelt examines in depth in our latest cover feature.
