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Shell to raise shareholder payouts as world economy recovers

The company said that it will raise its dividend to within the range of 20% to 30% of cash flow from its operations

Shell announced on Wednesday its intention to raise shareholder payouts as the world economy continues on its path to recovery.

The oil giant said that, subject to final board approval, it would increase shareholder distributions to within the range of 20-30% of cash flow from operations, starting at its second-quarter results announcement.

It pinned the decision on strong operational and financial delivery, along with an improved macro-economic outlook.

The oil giant said that in the second quarter, Shell expects to have further reduced its net debt, although the extent of the reduction will be moderated by working capital movements.

In conjunction with the increased distributions, Shell will retire its net debt milestone of $65 billion and will continue to target further strengthening of its balance sheet and AA credit metrics. 2021 cash capex will remain below $22 billion, the statement added.

Shell share price is up by 2.44% during the Wednesday morning session.

Oil prices were near their highest levels since October 2018 as attention turned to the OPEC+ ministerial meeting last week. Upon the conclusion of the meeting OPEC+ postponed a decision on whether or not to ramp up oil production as major players within the cartel have failed to reach an agreement on supply levels.

Today’s teaser from Royal Dutch Shell ahead of second quarter results will be getting its investors as excited as James Bond fans are by the trailer for the latest film in the series, said Russ Mould, investment director at AJ Bell.

The company has unveiled plans to return more cash to shareholders in the second half as the recent surge in the oil price benefits cash flow and helps with debt reduction, he said.

He said this news is an interesting coda to the recent court decision in The Hague which effectively forced Shell to reduce its emissions more quickly than planned. This is likely to require significant investment and for this reason Shell is likely to be wary of overstretching itself in terms of dividend commitments.