Oil giants turn to scrip dividends in bid to retain cash

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.