- 15% dividend hike and new $4 billion share buyback
- Better than expected adjusted Q3 earnings
- Shares up 43% year-to-date
Oil giant Shell (SHEL) topped the blue-chip FTSE 100 index on Thursday with the shares gushing 4% higher to £23.86 after it boosted the dividend by 15% and announced a new $4 billion buyback.
Despite softer oil and gas prices in the third quarter to 30 September Shell delivered ‘robust’ adjusted earnings of $9.5 billion in the third quarter, which was slightly ahead of expectations.
The shares are up 43% year-to-date reflecting strong energy prices caused by the war in Ukraine. The gains have been supported by rising full year earnings estimates which are around 70% higher than where they began the year.
REWARDING SHAREHOLDERS
The $4 billion share buyback follows on from the prior quarter’s $6 billion buyback and is expected to be completed before the fourth quarter results are announced on 2 February 2023.
In addition, the company will hike the fourth quarter dividend by 15%, subject to board approval. Shell has distributed 30% of operating cash, or around $26 billion, over the last four quarters.
EXPERT VIEW
AJ Bell head of investment analysis, Laith Khalaf, commented: ‘Given it now plans to reward shareholders with a windfall of their own through its pledge to increase the fourth quarter dividend, calls for a further levy on Shell’s bumper profits are only likely to increase.
‘In fairness, chief executive Ben van Beurden has been self-aware enough to acknowledge this fact and he could argue he has to reward shareholders who, after all, saw the first cut in the dividend since the Second World War during the pandemic.
‘The optics of paying out more to investors aren’t too clever when many households are really struggling with their energy bills.
‘The oil and gas industry tends to be highly cyclical, and things may not be as good again for Shell as they were in 2022 for some time.
‘Oil prices are coming under some pressure as the economy slows and gas prices in Europe have fallen as storage levels increase - though whether this will last once winter really hits is open to question.’
DISCLAIMER: AJ Bell referenced in this article owns Shares magazine. The editor of this article (James Crux) owns shares in AJ Bell.
