Royal Dutch Shell needs growth delivery, higher oil, Citi says

Investors attracted by the oil major´s high dividend yield needed to reflect on the fact that there was a considerable gap in its "financial framework" which made "growth-delivery" and higher oil prices necessary, analyst Alastair R. Syme said in a research note sent to clients.

Year-to-date the stock had outperformed markets by 25% and global Big Oil by approximately 7%, Syme said, as a result of its high Beta to oil and the firm´s updated strategic framework promising growth out to 2020.

Be that as it may, "the near-term does not look to be delivering for investors with high operational leverage to the low oil price environment manifesting in a significant shortfall in 2Q16 earnings," he added.

The analyst also referenced the company´s own second half guidance for profits and non-cash costs into 2017 as reasons behind his decision to lower his estimates.

Were all the company´s dividends to be paid out in cash that would mean paying out 80% of its cash flow from operations as dividend over the first half of the year, Syme concluded.

Syme stuck to his neutral recommendation on shares of Royal Dutch Shell.