Shell´s dividend payout is safe, SocGen says

Investors need not be overly-concerned about the risks to Royal Dutch Shell´s dividend, although the likelihood of a projected $25bn share buyback over four years might be a wholly different question, analysts at SocGen said.

At its 7 June analysts meeting, the company would need to adress worries about its capital spending budget, its asset disposal programme and the sustainability of its dividend, analysts Irene Himona, Mehdi Ennebati, Yoann Charenton said in an extract from a research report sent to clients on the day before.

The fact that in 'cash-out' terms the oil major´s capital expenditure was already at between $25 to $28bn, as oppossed to headline budgeted capital investment of $30bn, meant the company´s guidance was already in-line with expectations, the analysts said.

Nonetheless, they believed markets were right to question Shell´s timeline of three years to complete its targetted $30bn in asset disposals.

As regards the dividend, if necessary Shell could opt to maintain its scrip dividend beyond next year and delay its $25bn four-year share buyback programme, they said.

Combined, those two measures would save the company $10bn a year in cash outflow - equivalent to a $20/barrel higher oil price, so closer to $70 per barrel - which in their opinion was "sufficient" for Shell to manage the balance sheet.

Ahead of the meeting with analysts, SocGen boosted its target price on the shares from 1,660p to 1,900p and reiterated its 'buy' recommendation.