Royal Dutch Shell Plc Hikes Dividend On Cash Flow Boost

Royal Dutch Shell Plc (LON: RDSB) also unveils earnings fell by almost half.

Mark Stones

Mark Stones (TMFMumbojumbones) joined The Motley Fool in 2014 and initially worked as a writer for Fool.co.uk, before joining the Fool’s analyst programme. Mark earned a BA in English from Loughborough University. Although he spends more time reading annual reports than Russian literature these days, he still appreciates a novelist’s antipathy toward the accepted view, which is a useful attitude when trying to sniff out hidden gems on the stock market. His approach to investing has been largely influenced by the principles of Warren Buffett and Peter Lynch. He also takes a special interest in the work of healthcare companies. Outside of investing, Mark plays guitar, enjoys good writing and has a guilty passion for combat sports.

Published 30 April, 2014 8:45 am BST

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Shell (LSE: RDSB) this morning reported a 44% fall in profits on a $2.9bn impairment charge relating to refineries in Asia and Europe.

Cash flow, however, improved to $14bn from $11.6bn a year earlier, and the first-quarter dividend hiked 4% to 28p. As a result, shares in Shell lifted by more than 3.5% in early trade.

Shell’s profit in the first quarter — stripping out losses relating to the changing value of inventories — fell to $4.5bn from $8bn a year earlier. Revenue fell to $110bn against $113bn.

Oil and gas production was 3.2 barrels of oil equivalent per day (boe/d), which is 4% below last year. That said, new production from the deep-water Gulf of Mexico and Iraq has proven profitable.

Olympus — Shell’s largest floating deep-water platform in the Gulf of Mexico — was installed more than six months ahead of schedule. It is expected that peak production will reach 100 thousand boe/d in 2016.

The chief executive, Ben van Beurden, commented:

“Our first quarter 2014 results reflect more robust levels of profitability. However, as we saw in 2013, we are in an industry where high volatility remains, both in the macro-environment and in our quarterly results.”

“We are aiming to continue to balance growth and returns, by focusing sharply on our three key priorities – better financial performance, enhanced capital efficiency, including more selectivity on project choices and $15 billion of divestments in 2014-15, and continuing strong project delivery.”

Analysts expect Shell’s full year dividend to amount to 112p. At the current share price Shell offers a potential income of 4.8% and trades on a forward P/E of 12.

Of course, as refining becomes more difficult, costs have rocketed for the big oil companies. The decision to ‘buy’, based on the success Shell has in streamlining its business, today’s results and the wider prospects for the oil sector, remains entirely your decision.