A note to Shell's CEO
What on earth is the board's plan for its shareholder's dividends?
Dear Mr Sawan,
Like thousands of others, I am a longstanding shareholder in Shell. It has been, I’m sure you agree, a bumpy ride in recent years. The turbulence really started when the board, under your predecessor Ben van Beurden, confronted with that crazy day when the price of oil fell below zero, had a rush of blood to the head and slashed the dividend. It was a moment of hysteria that overturned more than half a century of steady, slowly rising, payouts. Even now, it seems an extraordinary case of collective madness.
Indeed, ever since, Shell has been struggling to establish a dividend policy that outsiders can understand. Consider: as a result of that boardroom panic, the quarterly dividend was chopped from 47c to 16c. After two quarters, when it transpired that the world wasn’t going to end after all, the payout was raised, cautiously, to 16.65c. After another cautious rise, to 17.35c, it was “rebased” to 24c.
In 2022, as oil demand recovered from Covid, the rebase was set at 25c, until the fourth quarter, when it went up to 28.75c. Last year, after another quarter at 28.75c, it was rebased again, to 33.1c, 33.1c, and 34.4c, where it has stayed so far this year - still, you will note, far below the steady-state 47c of yore. The point of repeating all this is to demonstrate how little idea the board had about any need for the consistency practiced by their predecessors.
What ís the policy today? Who knows? The picture has been further muddied by renewed enthusiasm for buybacks, that process of paying some shareholders to go away at the expense of those who remain. The latest iteration is a $3.5bn program of purchases running through Christmas. Nowhere in the announcement is there any calculation of whether buying in the shares is the best investment that the board can find, nor any indication of a maximum price to be paid aboard this gravy train for the company’s advisors.
Still, perhaps we shareholders should look on the bright side. Shell never went the full greenery (although it might be embarrassed by this undated webpage) unlike poor old BP, and recently seems to have realised that it is an oil and gas company after all. This awkward history explains why shares in the UK companies are rated far below those of ExxonMobil, a business that never bought what David Cameron once called “that green crap”.
They both work in a hostile home environment, which makes life harder, and this week’s news of Shell’s joint North Sea venture with Equinor looks like a step towards the exit from a declining, over-taxed province. That might encourage the company to consider what might be described as the nuclear option. Shell’s public position is that it has no plans to emigrate to New York, a move that would be a crippling blow to London’s depressed stock market. But taking flight might be in the best interests of us shareholders, while we try and figure out what on earth the board plans for our dividends.