Should Shell and BP ‘starve’ by maintaining dividends?

BP and Shell … account for a fifth of all investment income from the UK stock market.

Shell in particular not cutting payouts since the second world war, it would feel like the final domino falling for income investors.

Shell shares have tumbled 39% this year, having plunged as much as 60% at the lows of the coronavirus crash, while shares in BP have dropped a third. Yields on the oil giants are running at precipitous highs of 10.7% and 10.3% respectively.

Do you think they will cut their dividends?

I think they will pay out a scrip dividend, and heavily encourage investors to pickup more shares at their current discount rather than taking cash. That said the income funds and pensions which back these firms will have little choice other than to take the cash.

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This seems a good place to talk about accountability as well.

What should be done with companies which pay off fines but don’t solve the root cause issues?

An interesting link which was shared with me the other day.

A list of fines and violations by company, in this case where the HQ is officially in Britain. Which for Shell it is not, but their record isn’t much better

How responsible should share holders be? The ESG movement has brought in a new age of “voting with your feet/wallet” to investing, should more pressure be placed on companies or on shareholders to encourage better outcomes.

We also had the BP announcement which was as grim as you’d expect.

BP and Shell has made headlines by cutting their dividends.

Shell is cutting its quarterly dividend by two-thirds, from 47 cents to 16 cents, starting in the first quarter of this year.

I wonder what this will do for investor flow. As a dividend king, will investors look elsewhere now it’s been cut by 2/3rds.

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