“The world has fundamentally changed over the last few months”. With those 10 words, Shell boss Ben van Beurden did his bit to add to the gloom, at least for millions of investors.
The last time Shell chopped its dividend was in 1945 after the Dutch famine, or Hongerwinter, which had been inflicted on the Netherlands during Nazi occupation.
Since then, it has survived the post-war austerity of the late 1940s and 1950s, rampant inflation and the oil shock of the Seventies, numerous stock market crashes, and the great recession that followed the financial crisis.
But after 80 years of endurance, the FTSE’s biggest dividend payer has bowed to the inevitable. The payout has been slashed by two thirds to 16 cents per share, from 47 cents per share.
Brent crude prices have plunged to an 18-year low of $24 a barrel, and the price of West Texas Intermediate fell into negative territory for the first time ever, leaving Shell’s quarterly profits half where they were a year ago.
As Van Beurden says with characteristic understatement, maintaining a dividend that cost $15.2bn (£12.1bn) last year, is no longer “prudent”. Still, it is quite the reversal from two months ago when Shell unveiled an £8bn cost-cutting plan to preserve cash, and raised another £9.7bn of debt, in an effort to continue to safeguard the dividend.
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