Oil and gas group Shell performed better than expected in the third quarter and is raising the dividend. This is striking because the dividend was significantly reduced six months ago.
Shell’s turnover in the months of July to September was 44 billion dollars (37.5 billion euros). That is almost a halving compared to the same period last year, but an increase of 35 percent compared to the second quarter.
Then Shell was hit by the low oil and gas prices and because the corona crisis meant that there was much less demand for fuels. Demand picked up somewhat in the past quarter as corona measures were relaxed.
Shell also cut costs and oil prices were higher. Profit was $ 177 million against a loss of $ 18.4 billion in the second quarter. The profit is higher than analysts had assumed.
Higher dividend
Remarkably, Shell has increased the dividend, the portion of the profit paid to shareholders, by 4 percent, or from $ 0.16 to $ 0.1665 per share. Shell also wants to continue to increase the dividend in the coming years. Investors are happy with the numbers and the higher dividend.
Shell’s share price has risen more than 4 percent and is now above 10 euros again.
Dividend had just been cut
Shell actually cut the dividend at the end of April. The profit distribution per quarter then went from $ 0.47 to $ 0.16. That was much more than expected at the time.
It was also the first cut since World War II. This step was particularly successful because many investors, including private individuals, had the Shell share because of the stable dividend.
‘Very bizarre’
The fact that Shell is now increasing the dividend is ‘very bizarre’, says Jos Versteeg, equity analyst at InsingerGilissen. “They probably want to show a sign of strength.”
Shell CEO Ben van Beurden seems to agree, he calls Shell in any case ‘a convincing investment’.
‘Almost looks like panic’
Versteeg thinks the increase of the dividend is “optical stuff.” “You expect some stability from Shell.” There was a lot of criticism of the dividend cut in the spring.
Yesterday the exchange rate even fell below 10 euro and briefly reached its lowest point since June 1993. “They probably want to do something, it almost looks like panic”, says Versteeg.
‘Shell must invest’
It is true that a lot of money comes in at Shell, but they only have oil reserves for eight years, so they have to invest heavily otherwise they will soon be without oil, says Versteeg.
He also questions the dividend increase: “You don’t know how difficult it will be.”
Shell really needs the money, says Versteeg. “They want to pay off debts, they have to invest and they have to come up with a plan for when fossil fuels can no longer be burned.”
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