Shell abolishes scrip dividend in further sign of oil industry’s financial recovery

Royal Dutch Shell (LSE:RDSB) has restored its all-cash dividend in place of a scrip dividend programme, marking another significant turning point in the financial recovery of the oil industry.

The Anglo-Dutch company initiated the scrip dividend scheme, which pays investors in shares rather than cash, at the lowest ebbs of the recent oil price crash which first manifested in 2014.

However, the abolishment of the scrip dividend and the reiteration of plans for a US$25 billion share buyback programme by the oil giant has breathed a fresh wave of confidence into the sector, which has also been boosted by the oil price returning to above the $60 a barrel mark.

The return of the oil price has boosted profitability amongst the world’s oil and gas majors, including Shell which recently posted a 47% rise in earnings to $4.1 billion during Q3 2017.

Furthermore, in a presentation to investors in London, Shell raised its cash flow outlook to $25-30 billion, taking into account the current oil price of around $60 a barrel.

Debt reduction remains a priority for the company which is looking to complete a $30 billion divestment plan, and spending discipline will also be maintained with guidance for annual capital expenditure unchanged at $25-30 billion a year.

Shell also announced a new target to reduce the net carbon footprint of its energy products by 20% by 2030 and by about half into 2050.