Oil giants turn to scrip dividends in bid to retain cash
But using that tool means companies need to issue new equity, diluting their earnings per share in future
London
IN a record downturn for the oil industry, cash is everything to companies and dividends are everything to their investors. One tool is helping Europe's three biggest producers preserve both, but there's a long-term price to pay.
Royal Dutch Shell Plc, Total SA and BP Plc will retain US$8 billion a year in cash by giving investors the option of receiving payouts in shares instead, according to Jean-Pierre Dmirdjian, an analyst at Liberum Capital Ltd. That's equivalent to about 8.5 per cent of total cash and equivalents currently on their books, making the so-called scrip dividend a vital tool as companies curb spending to ride out the slump in oil prices.
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