FTSE 100

Are analysts expecting Shell’s dividend to grow?

The Shell share price (LON: SHEL) is trading at 1367p at the time of writing. Over the past year it has risen by 28% so that it has a dividend yield of around 3.3% at the present time using last year’s dividend payment. By way of comparison, the FTSE 100 index has gained 23% in the past year and currently has a dividend yield of around 3.4%.

Looking ahead, consensus analyst forecasts indicate that they believe its dividend could rise over the next couple of years. For example, in the current year analysts expect Shell to pay dividends per share of 50.1p. This puts the stock on a forward dividend yield of around 3.7%.

In 2022, analysts are currently expecting the oil and gas major to raise dividends per share so that they reach 52.3p. Using this figure and Shell’s current stock price, the company has a forward dividend yield of 3.8%.

Latest Shell share price news

The latest investor update released by the company was on 11 February 2021. It set out a new strategy that seeks to accelerate the firm’s transformation to a net-zero business. Within this, the company stated that it intends to maintain its progressive dividend policy. This means that it is aiming to increase dividends per share by around 4% per annum, although this is dependent on Board approval.

Shell also intends to reduce its net debt to around $65 billion. Upon achieving this goal, the firm plans to target total shareholder distributions of 20-30% of cash flow from operations. It expects to achieve an increase in shareholder distributions through a combination of progressive dividends and share buybacks. It will aim to retain its near-term capital expenditure levels of $19-22 billion per year, but will balance future capital expenditure with considerations for its balance sheet and shareholder distributions.

Key to the company’s future is its plan to use short-term targets to gradually reduce carbon emissions so they reach zero on a net basis by 2050. It will invest in sustainable forms of energy, while linking staff remuneration to the reduction of carbon emissions where possible. It also intends to provide holistic energy solutions to customers through having a presence across the entire energy system.

Future outlook

In terms of Shell’s financial outlook, analysts are currently expecting the company to experience a return to profitability in the current year. They then expect the business to produce a 33% rise in earnings per share next year.

Using the current Shell share price, this means that it has a forward price-earnings ratio of around 13 using this year’s consensus analyst forecast. It has a prospective price-earnings ratio of just over 9 using next year’s analyst estimate. The company is expected to publish its first quarter results on 29 April 2021.

Not Investment Advice Note: Views expressed are those of the writer. The author does not own any stocks mentioned. The article is information, not advice. Share prices can rise and fall. Past returns are not a guide to the future. Please do your own research.