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Shell’s “ballooning” debt could put 7.5% dividend at risk, analyst says

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Aug 10 2016, 14:57 ET | By: Carl Surran, SA News Editor

Royal Dutch Shell’s (RDS.A, RDS.B) 7.5% dividend could be at risk because of its “ballooning” debt, says Raymond James analyst Jean-Pierre Dmirdjian, adding that the concerns outweigh the longer-term appeal of the company’s transformation story.

The analyst says his fair value of ~$27/share makes Shell seem like a potential buy, but it is “too soon to be charmed by the reshaping plan” announced in June.

James notes the “unsupportive oil price environment [which] puts a strain on cash flow” and makes debt reduction an increasing priority; the firm reiterates its Market Perform rating on the stock.

Now read: Royal Dutch Shell: Will The Big Bet On Natural Gas Pay Off?

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