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What is happening with Shell stocks at the moment? A quick overview of the performance of Royal Dutch Shell during 2020

Already in 1907 Royal Oil and the British Shell Co. decided to enter into a very close cooperation. Royal Oil acquired a 60% interest in the Royal/Shell Group. British Shell acquired an interest of 40%. However, it was not until 2004 that the two companies moved to a single capital structure. This led to a new parent company called Royal Dutch Shell plc with the primary listing on the London Stock Exchange. The second listing is known on the AEX and both shares can be found under the TICKER: RDSA. Source: Brokers vergelijken | Vergelijk-gratis.nl

Shell share news: billion-dollar write-downs

On December 21, 2020, the oil and gas company announced that it may have to set aside up to $4.5 billion for depreciation in the fourth quarter. That money is needed for depreciation of assets, but it is also needed for reorganization costs. The oil price has been under pressure for years, but the corona crisis meant a new low for the black gold. The price of a barrel of oil is now structurally below the levels that oil companies take into account. For many companies, the current levels even mean losses.

  • Due to the relatively mild winter weather in Europe, the price of gas is also under pressure. This also puts pressure on Shell’s results. Climate change and the rise of renewable energy sources are also forcing the company to innovate. Innovation costs money, which is why the company is now putting billions aside for reorganization costs.
  • In the summer of 2020, Shell also announced that it was writing off $16.8 billion as a result of the corona crisis. In particular, the adjustments to the margins, the developments surrounding COVID-19 and the macro-economic conditions were given as reasons at the time. This mainly concerns asset write-downs.

Dividend under pressure

Shell is loved for its stable character and relatively high dividend. Incidentally, this generous dividend had not been missed since the Second World War. Due to the corona crisis, Shell was forced to reduce the dividend in April 2020. As a result of the many write-downs and loss items, Shell decided to reduce the quarterly dividend from $0.47 to $0.16 per share. Instead of $1.88 per year, the dividend suddenly went up to $0.64 per year. The generous halving of the dividend caused the Shell share price to lose a lot of ground in The Netherlands as mentioned here.

The third quarter was better than expected, and Shell decided to immediately increase the dividend again slightly. In the third quarter, $0.1665 per share was paid out. Shell also intends to continue to increase the dividend in the coming years. The substantially lower dividend gives Shell financial room to continue to invest in innovation and to absorb setbacks from lower energy prices.