Will Royal Dutch Shell plc (ADR) (RDS.A) Maintain Dividends?
By: Micheal Kaufman: Sep 21, 2015
Analysts are concerned that future of Royal Dutch Shell plc’s (ADR) (NYSE:RDS.A) dividend is under immense risk, and expressed concerns that Shell will not be able to deliver its promise of 7% dividend yield. Currently, the American Depository Receipts (ADR) of Shell offers a one-year forward dividend yield of 7.6%, with quarterly dividend payment of 47 cents per share.
The glut in crude supply, China’s economy weakening, and lowered crude demand from Asian and European market has led oil prices to fall from $116 per barrel last June to below $50 per barrel this summer. Share prices of most energy companies have slumped. Companies that were once expecting crude oil prices to recover soon are now taking a long term bearish view of the oil market.
Oil companies have started cutting their capital expenditure (capex). Shell announced 20% reduction in capital spending this year. Some companies have also laid-off hundreds of workers, while others have start testing new projects at lower oil prices. Companies are trying to reposition themselves to the current economic situation, as this is the only way to survive in the market. Last week, credit rating firm Moody’s Investors Services said that energy companies including Shell should cut their production to survive in the long run. Under these circumstances, it seems that oil producers would be forced to cut their dividend. In July, Chesapeake Energy Corporation (NYSE:CHK) announced that it would suspend its dividend payment to save around $240 million this year.
Meanwhile, Shell’s basic assumption behind the BG Group plc (ADR) (OTCMKTS:BRGYY) acquisition was that oil prices will recover by the end of this decade. Currently, Shell offers 7% dividend yield to its investors. On the other hand, BG Group is trading at a discount of 10% from its offer value by Shell, and offers a dividend yield of 9%.
However, as the future of oil prices seems unwelcoming, investors and analysts are skeptical about the deal. This is evident by the fact that the Australian Competition and Consumer Commission (ACCC) has delayed its decision on the deal until November. Earlier this month, the company’s CEO, Ben van Beurden held a meeting with a group of investors to convince them that only something “cataclysmic” could stop the deal.
Market is concerned that higher dividend yield at the expense of low share prices will mean that the dividend is not sustainable and company may cut its dividend payment in the future. However, Shell has not cut its dividends over the past 70 years. Even at oil below $10 per barrel, it maintained its dividend payments and has always given priority to its shareholders.
The Anglo-Dutch company is in a good position to finance its future projects while satisfying its investors. At the end of second quarter 2015, Shell’s gearing ratio was 12.7%, much better than other oil giants. Although the completion of the Shell-BG would require the oil company to raise its debt financing, it seems that the company would still be in a strong position to finance its dividends.
This website and sisters royaldutchshellplc.com, shellnazihistory.com, royaldutchshell.website, johndonovan.website, and shellnews.net, are owned by John Donovan. There is also a Wikipedia segment.
Royal Dutch Shell conspired directly with Hitler, financed the Nazi Party, was anti-Semitic and sold out its own Dutch Jewish employees to the Nazis. Shell had a close relationship with the Nazis during and after the reign of Sir Henri Deterding, an ardent Nazi, and the founder and decades long leader of the Royal Dutch Shell Group. His burial ceremony, which had all the trappings of a state funeral, was held at his private estate in Mecklenburg, Germany. The spectacle (photographs below) included a funeral procession led by a horse drawn funeral hearse with senior Nazis officials and senior Royal Dutch Shell directors in attendance, Nazi salutes at the graveside, swastika banners on display and wreaths and personal tributes from Adolf Hitler and Reichsmarschall, Hermann Goring. Deterding was an honored associate and supporter of Hitler and a personal friend of Goring.
Deterding was the guest of Hitler during a four day summit meeting at Berchtesgaden. Sir Henri and Hitler both had ambitions on Russian oil fields. Only an honored personal guest would be rewarded with a private four day meeting at Hitler’s mountain top retreat.
IN JULY 2007, MR BILL CAMPBELL (ABOVE, A RETIRED GROUP AUDITOR OF SHELL INTERNATIONAL SENT AN EMAIL TO EVERY UK MP AND MEMBER OF THE HOUSE OF LORDS: 
MORE DETAILS:
A head-cut image of Alfred Donovan (now deceased) appears courtesy of The Wall Street Journal.
