Investors punish Big Oil for cutting dividends

Stock valuations are lacklustre, but spinning off low carbon businesses could reinvigorate share prices

Try as they might to reinvent themselves, the oil majors are still viewed by investors as dividend cash cows. European players that cut shareholder payouts are now blighted by discounted stock valuations despite the recent crude rally. To reinvigorate share prices, oil bosses can either boost dividends or sell off parts of their businesses that are poised for growth – namely, their low carbon new energy divisions, according to analysts.

Photo by John Cameron on Unsplash

Investors have not forgiven European oil majors for slashing dividends when the pandemic crashed the market last year. Resurgent crude prices have flooded Big Oil balance sheets with free cash since the New Year. Oil stocks duly rose but the gains were weak when share prices are measured as a multiple of forward cash flows.

Shell’s London-listed shares have barely risen 6% since the start of the year, despite a 13% year-on-year rise in profits. The company reported $3.2 billion dollars in adjusted earnings in the first qu…