Royal Dutch Shell will return to paying pure cash dividends and step up its investment in cleaner energy as it turns a corner after more than two years of cost cuts and disposals prompted by weak oil prices.
Shell Chief Executive Officer Ben van Beurden sought to strike a balance between reassuring investors it can increase returns in its core fossil fuel business during an "era of volatility" in oil prices while preparing to step up investments in renewables.
The Anglo-Dutch company said it will abolish its scrip dividend, through which investors can opt to receive dividends in shares or cash, in the fourth quarter of 2017.
The scheme was introduced in early 2015 to help preserve cash after oil prices fell by more than half from over $100 a barrel and the company bought BG Group in a $54 billion deal.
Shell's shares were trading 2.8 percent higher at 1020 GMT, compared with a 1.1 percent increase in the broader European energy index.
BP had pipped its rivals when announcing last month that it would resume share buybacks in the fourth quarter in order to offset the dilutive effect of the scrip dividend. Norway's Statoil has also eliminated its scrip dividend.
Simon Gergel, U.K. Chief Investment Officer at Allianz Global Investors welcomed the removal of scrip dividend "which reflects their improving cash generation profile."