Large companies’ capital markets days tend to be slow-moving, presentation-heavy outings. At its London investor roadshow on 28 November, Royal Dutch Shell (RDSB) sent market pulses racing a little faster than usual when it unveiled plans to abandon its scrip dividend earlier than analysts had forecast.
From its next quarterly dividend onwards, the oil major will withdraw its offer of a share-based payment and instead distribute its returns to shareholders in cash only. A halt to the steady issuance of billions of dollars’ worth of shares – which arrives with a 20 per cent level of gearing “in sight”– removes a major source of shareholder dilution.
The shares rose 4 per cent on this news and a revised forecast to organic free cash flow, which should increase 20 per cent to $30bn a year by 2020, at $60 per barrel. Of equal encouragement – particularly for investors focused on the risks that fossil fuel subsidies may one day pose to the sector – Shell said it will reduce the net carbon footprint of its energy products “expressed in grams of CO2 per megajoule consumed” by a fifth by 2035, and by half by 2050.
Panmure Gordon expects adjusted pre-tax profit of $18.2bn and EPS of $1.91 this year, rising to $29.9bn and $2.01 in 2018.