Shell stops scrip dividend program, switches emphasis to share buybacks


Royal Dutch Shell (RDS.A, RDS.B) says it will no longer pay dividends to shareholders in the form of stock, effective with its Q2 dividend, instead putting its emphasis on buying back its own shares as well as paying dividends in cash.

The move ends inefficiencies created by Shell's dual share structure and Dutch tax rules, and should save the company money, WSJ's Helen Thomas writes; equally important, it suggests Shell is feeling confident about its cash flows.

In London, B shares fell as much as 3.2% to 2,470 pence, their biggest intraday drop in four months.

A shares +0.7%, B shares -3.2% premarket.

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Comments (10)
  • Chris Zocca
    , contributor
    Comments (286) | Send Message
     
    This means that US investors will no longer be able to avoid foreign tax withholding on RDS-A shares by re-investing dividends via the scrip dividend programme. In retirement accounts, there is no way to recover these withheld foreign taxes. US investors who own RDS-A shares in retirement accounts should switch to RDS-B as the B shares represent shares traded in London and they are not subject to foreign tax withholding due to a treaty between US & Great Britain.
    22 May 2014, 08:47 AM Reply Like
  • Rick D
    , contributor
    Comments (512) | Send Message
     
    True, and good advice. I suggest making the switch after June 26 (when the last payout of shares under the Scrip Dividend Programme occurs) but before the ex-dividend date for the next dividend (currently scheduled for August 13).
    22 May 2014, 02:51 PM Reply Like
  • maybenot
    , contributor
    Comments (6516) | Send Message
     
    Interesting. Seems a rather unfriendly shareholder move. Whatever.

     

    Long XOM, COP, BP, CVX
    22 May 2014, 09:29 AM Reply Like
  • Hammer29
    , contributor
    Comment (1) | Send Message
     
    Can someone tell me why the b shares are down
    22 May 2014, 10:40 AM Reply Like
  • Slick E
    , contributor
    Comments (146) | Send Message
     
    My best guess is that US/UK investors are typically invested in B shares (for tax reasons) and are spooked.

     

    Chris Zocca is right, and this is a real bummer. I've enjoyed holding the A shares with their superior yield, and haven't had to worry about the Dutch taxes because of the Scrippe dividend reinvestment. Now I have to decide whether to switch to the B shares or move out of Shell entirely.
    22 May 2014, 11:26 AM Reply Like
  • Rick D
    , contributor
    Comments (512) | Send Message
     
    B shares were at an artificially high level due to Shell repurchasing large amounts of B shares. In the future, Shell will not be forced to repurchase only B shares, but will be able to repurchase either share class. With a large spread, obviously they would repurchase A shares because they are cheaper. That would move the excess demand from B shares to A shares, greatly narrowing the spread.

     

    The market is reacting to the upcoming change in supply and demand for the two share classes.
    22 May 2014, 02:48 PM Reply Like
  • Slick E
    , contributor
    Comments (146) | Send Message
     
    I came across this discussion on why the gap is narrowing now between the A and B shares. It's very interesting and well explained.

     

    http://bit.ly/1tpwv8w
    22 May 2014, 02:04 PM Reply Like
  • smurf
    , contributor
    Comments (6048) | Send Message
     
    I like it. Rather have the cash. Long RDS-B.

     

    Mr. Market will get over it. Don't understand why they have fallen in the first place.
    22 May 2014, 02:04 PM Reply Like
  • heligator
    , contributor
    Comments (59) | Send Message
     
    Before today the gap widened significantly from even a year ago. It's not surprising to see it shrink from both sides.
    22 May 2014, 04:15 PM Reply Like
  • vandeley
    , contributor
    Comments (126) | Send Message
     
    The stock didn't drop, just the spread between the two shares decrease. RDS A went up.
    23 May 2014, 05:24 AM Reply Like
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