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.
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.
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”.
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!