Oil and gas giant Shell is ending its popular scrip dividends after the scheme became increasingly costly.
Scrips are new shares issued by a company to investors in lieu of cash payments. Shell said the cancellation meant the second quarter interim dividend and future dividends, forecast at £7billion for the full year, would be settled entirely in cash.
Broker Investec welcomed the decision despite Shell’s scrip dividends having proved more popular than expected, with a 47% take-up in the fourth quarter of 2013.
“Originally intended to balance cash in/out, it had become a high-profile source of embarrassment, even if the actual value loss was relatively modest,” wrote analyst Neill Morton.
Shell introduced its scrip in late 2010 to balance cash in and out, but it proved more popular than expected.
For Dutch-tax reasons, the Hague-based company was issuing discounted “A” shares as scrip dividends and buying back “B” stock at a rapidly rising premium.
The gap in value between the two kinds of shares had grown to a 9% difference by Wednesday.
Recommended for you
