Shell dividend to come back into focus in 2017, Cannacord says

Alexander Bueso Sharecast | 20 Apr, 2017 15:54 | | |

Royal Dutch Shell, oil & gas, petrol

Royal Dutch Shell 'B'

2,090.00

15:15 22/06/17
-0.33%
-7.00
  • 43.99
  • -0.93%-0.41
  • Max: 44.19
  • Min: 43.56
  • Volume: 3,826,151
  • MM 200 : n/a
15:15 22/06/17
  • 456.30
  • -0.09%-0.40
  • Max: 457.30
  • Min: 450.00
  • Volume: 10,498,423
  • MM 200 : n/a
15:15 22/06/17
  • 7,431.83
  • -0.21%-15.96
  • Max: 7,448.48
  • Min: 7,398.83
  • Volume: 0
  • MM 200 : n/a
15:15 22/06/17
  • 5,260.09
  • -0.27%-14.17
  • Max: 5,262.53
  • Min: 5,237.33
  • Volume: 0
  • MM 200 : n/a
15:15 22/06/17
  • 3,542.47
  • -0.33%-11.88
  • Max: 3,562.18
  • Min: 3,521.91
  • Volume: 0
  • MM 200 : n/a
15:15 22/06/17
  • 1,523.71
  • -0.22%-3.39
  • Max: 1,526.95
  • Min: 1,517.14
  • Volume: 0
  • MM 200 : n/a
15:15 22/06/17
  • 7,616.24
  • -0.26%-20.01
  • Max: 7,636.25
  • Min: 7,487.67
  • Volume: 0
  • MM 200 : n/a
15:15 22/06/17
  • 4,120.78
  • -0.21%-8.63
  • Max: 4,129.86
  • Min: 4,104.16
  • Volume: 0
  • MM 200 : n/a
15:15 22/06/17
  • 4,065.43
  • -0.19%-7.81
  • Max: 4,073.64
  • Min: 4,049.54
  • Volume: 0
  • MM 200 : n/a
15:15 22/06/17

Cannacord Genuity sounded a cautious note on shares of Royal Dutch Shell's B shares pointing out the company's lack of free cash flow and mounting debt pile given its current dividend payouts, telling clients it preferred BP instead.

Analyst Alex Brooks expected the oil major to post a bumper set of first quarter financials.

However, Shell's earnings were seen falling short of its declared dividend for a seventh straight quarter and at the current oil price of $55 a barrel a sustained lift in profits above its divi payout was not on the cards in the foreseable future, he said.

Indeed, in the same research note the broker also said it was lowering its oil price forecast for 2017 from $60 a barrel to $55.

So, "despite protestations from management to the contrary" the payout was likely to come back into focus over the course of 2017.

A combination of hardly any free cash flow over the past decade, high levels of debt and asset disposals at an "unattractive" point in the cycle mean its shares are at the greatest risk of further downward pressure, Brooks said.

The analysts cut his target on the stock from 2,050p to 1,900p and reiterated a 'Sell' recommendation.


BP on the other hand was furthest along in its restructuring process and with the residual Macondo liability set to be gradually settled free cash flow was likely to improve "substantially".

Hence, Brooks said he favoured shares in BP over those in Shell or Total, leading him to reiterate a 'Buy' recommendation and 525p target on the shares of the former.

As of 15:48 GMT shares of Shell BP were down 0.22% at 2,000p.

More news

14:49 FTSE 100 movers: Provident Financial recovers; United Utilities goes ex-div

London's FTSE 100 was down 0.3% to 7,426.43 in afternoon trade.

14:47 Sector movers: Diageo weighs on Beverages after costly takeover of Casamigos

Pharma and Industrial engineering shares are at the top of the leaderboard amid supportive news-flow and broker commentary.

14:36 Malvern launches first digital learning tech product with Playware

Educational services provider Malvern International announced on Thursday that, following the strategic plan announced in November 2016 and as part of its collaboration with Playware Studios Singapore announced in January 2017, it was launching its first digital offering in the area of learning technology.

14:10 Directa Plus teams up with Italian uniform manufacturer Alfredo Grassi

Graphene-based product producer and supplier Directa Plus announced that it had entered into joint development agreement (JDA) with Alfredo Grassi, which it described as a manufacturer of customised protective clothing, workwear and uniforms for private and public organisations globally.

14:08 Trans-Siberian Gold inks second debt facility at reduced cost

Trans-Siberian Gold clinched a second debt facility at a reduced cost.

14:02 Milestone's Nexstar launches know-your-customer product

Digital media technology company Milestone Group announced that Black Cactus Holdings - its joint venture partner in its subsidiary Nexstar - had launched a ‘know your customer’ (KYC) and anti-money laundering (AML) platform.

13:52 Defenx enters into software distribution agreement with partner BV-Tech

Cyber-security software group Defenx announced on Thursday that, further to the software acquisition and investment by BV-Tech announced on 11 April, the company entered into a software distribution contract as part of its strategic partnership with BV-Tech.

13:43 US unemployment claims tick higher

US jobless claims edged slightly higher last week.

13:38 Electrical Geodesics board tells shareholders to approve £29m Philips merger

Neurodiagnostic medical technology company Electrical Geodesics (EGI) announced on Thursday that it had reached an agreement on the terms of a recommended acquisition under which Philips will acquire all of the outstanding shares of EGI for an aggregate consideration of £29m in cash, pursuant to the terms of an agreement and plan of merger entered into on 21 June between EGI, Philips, Merger Sub and others.

13:33 LXB makes further letting progress at Rushden Lakes and Stafford Riverside

Jersey resident closed-ended real estate investment company LXB Retail Properties announced further progress on lettings at Rushden Lakes Phase 3 and at Stafford Riverside on Thursday.