Despite weak first quarter profits, due to non-cash charges, and hot on the heels of its recent profit warning - its first in a decade - shares
of Royal Dutch Shell jumped by four per cent yesterday. Investors chose to focus on the oil major's ability to transform oil into cash. Thus, the company's cash flow rose by 8.3bn pounds over the last three months, a significant increase over the previous year. As a direct consequence, management opted to hike its first quarter dividend by four per cent to 47 cents. Progress was also achieved during the reporting period on the disposal of assets, including its 23 per cent stake in a deep-water project off Brazil for 1bn dollars, while in Australia it agreed to sell 2.6bn dollars in assets.
Critically, its often criticised strategy of investing too much in high-risk oil exploration is showing signs of shifting. As the capital investment decreases then there should be more cash to play with, including to pay down debt after last year's rise - although gearing is low so debt is far from becoming an issue. The stock has broken through its all-time highs. More importantly, on 11.2 times next year's earnings and offering a 4.7% dividend yield it looks like a good place to park cash. The Daily Telegraph's Questor team thinks there is a good possibility shareholder returns will accelerate through buy-backs this year as assets are sold. Buy, Questor says.
The main long-term drivers for the share price of Standard Life, auto enrolment and the need for individuals to take control of their own finances, are still in place. Yes, the surprise modification to the annuities market was a negative for the firm, but the opposite holds for the drive towards auto enrolment. In that same vein, the company's latest figures revealed that it continues to attract new funds in spite of the volatile nature of the markets at the beginning of the year. Total assets under management at Standard Life Investments, which handles money for third parties, registered an increase in these funds of 2.3%, to £104.8bn, thanks to third-party net inflows of £2bn.
The necessary regulatory approval to take on by Ignis Asset Management, bought from Phoenix Group, should soon come through too, helping it to target life companies. Lastly, inflows at the Global Absolute Return Strategic fund seem to have stabilised following the departure of a key manager last year, writes The Times' Tempus.
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