Shell cuts dividend for first time since Second World War

Royal Dutch Shell cut its dividend for the first time since the Second World War on Thursday in a devastating blow for investors who rely on the payout.

The oil major, the world’s largest dividend payer, shocked savers and pension funds by cutting the amount they will receive this quarter by two-thirds to 16 cents per share from 47 cents. That represents a total cut of $2.5 billion.

On top of that, it put the world’s biggest share buyback programme on hold, stopping the $2.5 billion it had been due to return to shareholders in this instalment.

Shell’s generous dividend is considered sacred in the City. The company has always prided itself on never having reduced or skipped it since 1943.

Shell has been hobbled by tumbling oil prices and profits fell by half in the first quarter as the coronavirus demand slump hit home.

Chief executive Ben Van Beurden said: “This is a big move and something that is difficult and hard to do but also very necessary.

“We want to preserve the financial resilience of the company even though we have no idea what might happen. It was a tough decision. No CEO wants to have a dividend cut on their record. Today is a difficult day for the company.”

He said the firm held four board meetings and numerous side-meetings to come to the decision.

The company paid £11.6 billion in dividends last year, making it the largest payer excluding Saudi Aramco.

Shares fell 7% on the cut, singlehandedly forcing the blue-chip FTSE 100 index into negative territory.

JP Morgan analysts said the reduction was a “necessary evil” to keep Shell on an even keel through the crisis.