Royal Dutch Shell: slashing the dividend

“Not many constants have held steady in the City over the past 77 years,” said Lex in the FT: “a few ancient watering holes, the Bank of England and the rock-solid Royal Dutch Shell dividend.” That last one has now disappeared. Last week, Shell slashed its “sacrosanct” shareholder payment by two-thirds, the first such cut since WWII. Cutting the dividend should save Shell $10bn a year, according to Barclays. But think of the havoc it will cause “everyone managing a pension or investment fund”, said Alex Brummer in the Daily Mail. Shell and BP together pay out almost one-fifth of FTSE 100 dividends. Although more highly geared than its rival, BP has held its dividend. Why couldn’t Shell? Either CEO Ben van Beurden is “showing Dutch prudence”, or he’s “sending a fundamental message about carbon fuel”: using the crisis to accelerate Shell’s plan of becoming a net-zero emissions firm by 2050 – the “Greta Thunberg of big oil”. Van Beurden claims the cut was made to protect Shell’s balance sheet at a moment “when we have no idea what could happen”. That sounds believable, said Nils Pratley in The Guardian. In his video message to investors, a title on his bookshelf behind him captured the mood:

by Ken Follett. Make no mistake, a stock market pillar has “tumbled”.

Fall of Giants,

Positive news about Covid-19 drug trials helped lift US markets last week, said The Wall Street Journal – notably news that US regulators have approved the drug remdesivir for “emergency use” after a study found it led to “speedier” recoveries in serious coronavirus cases. The drug, developed by the California-based biotech Gilead, has received a big thumbs-up from top US infectious disease official Dr Anthony Fauci, who compared the breakthrough to a moment in 1986 “when we were struggling for drugs for HIV and we had nothing”, said The Daily Telegraph. Gilead deserves praise for its prescience. The firm’s scientists began working on remdesivir to cure an unknown “Disease X” in the 2000s, amid growing concern after the Mers and Sars coronavirus outbreaks that

“an untreatable global pandemic was looming”. In fact, even if the treatment works, remdesivir is “no wonder drug”, said Tom Braithwaite in the FT: “in the best case”, it would simply “shorten hospital stays”. Yet Gilead’s shares are up by more than a quarter this year. If you want to understand why the realisation that the hoped-for “V-shaped recovery” isn’t going to happen “has been accompanied, bizarrely, by a mini-boom in stocks”, blame Gilead. The company “has become the bellwether stock for the entire market”. “Promising trial data” invariably sends the whole stock market higher.