Polliesdividend

Shell plans to boost their dividend

Shell is confident about the future and they outlined plans to boost shareholders returns.

Two weeks ago, on June 4th 2019, Royal Dutch Shell (XAMS: RDS) outlined plans to boost shareholder returns after 2020, while also increasing spending on oil, gas and power, as it capitalizes on years of cost cutting to prepare for a lower carbon future. Shell said it expected to be able to successfully make the transition to an energy system that emits less carbon dioxide. The plans did not indicate that the company wants to produce fewer fossil fuels.

 

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Shell said it was on track to realize their ambitious promises made at their Management Day back in November 2017 for 2020. For the organic free cash flow, Shell aimed at 25 to 30 billion dollars, with an oil price of 60 dollars per barrel.

 

Strategy

In their strategy update Shell announced an increase in their capital expenditure between 2021 and 2025 to an average of $ 30 billion per year (up from $ 25 billon).

Furthermore, for the next period (2021-2025), Shell is raising the target to an organic free cash flow of around $ 35 billion. That would provide room for $ 125 billion or more in return to shareholders through dividends and share purchases.

If we compare this with Shell’s recent numbers, we see it is an increase of more than 35%!

For 2016 up to and including 2020, Shell is expecting around $ 90 billion to return to shareholders. And between 2011 and 2016 $ 52 billion was paid to shareholders.

The company will hopefully increase the dividend per share as soon as the completion of an ongoing share buyback program worth 25 billion dollars is in sight. That program must be completed by the end of next year.

CEO Ben van Beurden summed up the key points of the company’s update: “Increased organic free cash flow outlook, greater potential distributions to shareholders and confidence in our world class investment case given our high-margin portfolio, improving returns and a globally recognized brand”.

 

Vrijheid Fonds

In my Vrijheid Fonds there are, at this moment, 387 shares of Royal Dutch Shell. These shares will give me around € 550 in Dividends in 2019. So, with a possible increase of 7% a year in the next period (2021-2025), my dividends will be boosted to approx. € 750 in 2025.

This is without the DRIP that I have installed for Royal Dutch Shell, so my dividend income will very likely be higher.

Shell is my oldest holding in my Vrijheid Fonds. I have been a shareholder since January 2004, and I haven not regretted it for a second. I love this great company. At this moment my Yield-on-Cost (YoC) is more than 9%!! With the possible dividend increases in the future, my YoC will only grow 😉 So what is not to like.

Do you own Royal Dutch Shell, and what are you thoughts about this new strategy update? I like to hear from you!

Cheers,

Pollie

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4 thoughts on “Shell plans to boost their dividend

  1. Jung in Rente

    Shell was also my first holding and today I own 560 shares (although I regret not having bought more, when the time was right).

    I think Shell‘s future looks much brighter today than it looked just 3-4 years ago. The entire strategy makes sense to me and I‘m happy that shareholders will benefit more than ever in the years to come!

    – David

    1. Mr. Groeigeld

      Shell’s dividend is very nice (I also hold shares), but the price and dividend has somewhat been “dead money”. With all good results it is time for a good dividend raise.

  2. DKK

    Hi Pollie, I have followed the Management Day and even printed out the full presentation. Shell is well positioned for the energy transition, envisaging to become the largest electricity company. I like their financial discipline. Shell de-leverages on the highs of the economic cycle building resilience. In the last 3 years they reduced net debt with $28B, bought shares back worth $25B and invested $25B per year. When the macro environment becomes challenging they use their flexibility by increasing their gearing. They also completed a divestment programme of $30B and reinvest in projects aligned with their core strategy. Shell’s project pipeline is impressive, especially their industry leading capital efficiency. Based on all above Shell’s investment thesis is very compelling. Therefore, I have decided to increase my position on pullbacks. As oil prices will likely increase, I’ll have to be patient.

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