Royal Dutch Shell Plc set out to woo disgruntled investors by raising its dividend and pledging to grow it steadily, making amends for slashing the payout just six months ago.
Amid a painful year for Big Oil, the Anglo-Dutch energy giant offered investors some good news. It also reported a larger-than-expected profit for the third quarter, lower net debt and strong cash flow, even as most of its divisions continued to be battered by the coronavirus pandemic.
Shares of the company jumped as much as 5.1% to 910.4 pence, the biggest gain since August.
Shell’s dividend for the quarter will increase by 4% to 16.65 cents a share and grow annually thereafter, the company said in a statement on Thursday. However, after the deep cut announced in April, the payout is little more than a third of its 2019 level.
“The board is confident we can grow the dividend with 4% this year and with similar percentages in years to come,” Chief Executive Officer Ben van Beurden said in a Bloomberg TV interview. Shell is demonstrating that it’s “a compelling investment case,” he said.
Shell’s adjusted net income was $955 million in the third quarter, down 80% from the same period a year ago, but better than even the highest analyst estimate. Earnings were hit by lower prices for oil and liquefied natural gas, and weaker refining, but that was partly offset by lower operating expenses and better marketing margins.
The company’s other financial measures also offered some comfort to investors. Gearing, a measure of debt to equity, dropped to 31.4% from 32.7% in the second quarter. Net debt fell to $73.5 billion, and Shell pledged to further increase shareholder distributions once that figure reaches $65 billion.
Shell has delivered a strong set of results that puts the company “back on the front foot” with investors, RBC analyst Biraj Borkhataria said in a note.
(Updates with share price in third paragraph.)
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