Shell cut its dividend for the 1st time since World War II, analysts see wisdom in this ‘iconic’ dividend cut

The Hague, May 4 - Neftegaz.RU. Shell cut its dividend for the 1st time since World War Two in an move that further highlights the severity of the latest oil sector downturn. Chief executive Ben van Beurden said the decision to reduce the dividend by 66% to 12.8p (16c) per share was “iconic” and would be “painful” for shareholders.

Van Beurden added no company boss wanted a dividend cut on their track record, but that long-term market uncertainty meant the move was “clear and obvious” for Shell, whose profits plummeted in the 1st quarter. He acknowledged that Shell would “probably” have to make headcount reductions, while deferred projects could eventually be cancelled.

Analysts said the dividend cut was “prudent” and would help free up cash as Shell tries to adapt for the energy transition. 2 weeks ago, the company revealed plans to become a net-zero emissions business by 2050.

David Barclay, head of office at Brewin Dolphin Aberdeen, said Shell had taken the “right step” to “strengthen its financial position and cut costs during a very difficult time”.

Biraj Borkhataria, analyst at RBC Europe, said: “Clearly the decision would have not been taken lightly by the board, however this is a positive move over the long term in our view. The move will allow Shell to pivot more easily through the energy transition, and not be tied to a $15 bln dividend to service each year.”

Shell has implemented a number of measures to bolster its balance sheet, including halting its share buyback programme and identifying billions of pounds worth of savings in response to the oil price collapse.

Chief financial officer Jessica Uhl said Shell anticipated a “deeper and longer recession”, with commodity prices and demand not recovering until 2022-23.