In the long run, oil producers like Shell (LSE: Shel) turned out to be reliable and generous dividend actions for investors.
Oil companies usually generate huge cash flows, and especially when oil prices are rising. This often gives them peace of capital to return shareholders through dividends and redemption.
But can Shell still provide vast dividends as the threats boost? Let’s look.
Dividend revival
As you can see, the annual dividends at Footies increased rapidly after they were exceeded in 2020. It was the first reduction in the payment from the Second World War.
City analysts expect that cash prizes from Shell will continue their last revival, as shown below:
| Year | An expected dividend for action | Dividend boost | Dividend performance |
|---|---|---|---|
| 2025 | 1.43 USA | 2.9% | 4.4% |
| 2026 | 1.508 American cents | 5.5% | 4.7% |
| 2027 | 1.581 USA | 4.8% | 4.9% |
According to the forecasts, the boost in dividend is snail-paced after a high 7.5% boost in 2024. However, payments are still expected to boost above 1.5% -2% forecast for the wider average FTSE 100 at that time.
In addition, dividend profitability of the long -term average index of 3-4% in the next few years.
Dead balance sheet
However, I am not prepared to take these forecasts according to the nominal value. First of all, I want to see how well they are covered by the expected earnings, taking into account the growing darkness around oil prices.
Encouraging, Shell is good on this front, with dividends from 2.5 times to 2.6 times. Reading 2 and higher provides investors with a wide safety margin.
To say, I am more than a little concerned about the state of the Shell balance sheet and what it may mean for dividends.
Falling oil prices mean cash flows from operating activities dropped by 44% year on year to USD 9.3 billion in the first quarter. Meanwhile, the net debt increased by USD 1 billion, to USD 41.5 billion.
Should I buy Shell shares?
Looking to the future, Shell remains a certain level of cash, which will return from dividends in the medium period.
In March, he announced plans to raise the payment of shareholders “from 30-40% to 40-50% of cash flows from surgery“By combining dividends and purchase of shares. Therefore, it was announced that in the next few months USD 3.5 billion in the next few months and pay a dividend of 0.358 percent for the first quarter.
In my opinion, however, there is a real danger that dividends may still fail in the next few years. On the other hand, the strategic and operational SHELL record is much better than in the case of competitive companies, including Bishop. And plans to speed up the reducing costs to protect against oil variability.
However, taking into account uncertain price forecasts and growing debts, dividends can be under pressure independently. The nature of SHELL operations with cash also increases the threat to forecasts (investment expenditure in 2025 alone is USD 20 billion from USD $ 20 billion).
As a long -term investor, I am also worried about dividends outside 2027, as the participation of renewable sources of oil in the energy market. This, of course, can have huge implications for the SHELL share price.
To sum up, I prefer to find other passive shares for income that can be bought despite the fighting of the Shell market.
