Royal Dutch Shell (RDSA) has been experiencing a severe downturn and is planning a comeback to reward its stakeholders who have remained patient throughout the difficult time the company has been facing. According to Narayanan (2018), a buyback program of at least $25 billion is set to take place after gaining confidence from the progress the company has made to strengthen its balance sheet. The other two energy giants Exxon Mobil (XOM) and Chevron (CVX) are set to give their report on Friday. RSDA shares dropped by 3.7% to 67.76 on the market, which is below the usual 50-day average. The company’s stock is considered to be on a flat base of 73.95. Meanwhile, ConocoPhillips is doing better as its revenues rose though not as expected.
The three giants continue putting more money in the booming stock market even as the oil prices keep surging. However, Exxon and Chevron have higher stocks than any other energy company. It is interesting to note that oil prices have been inconsistent due to the rising tensions between the United States and Iran in recent months. These tensions impacted the stock market such that Mobil market shares rose by 0.8% while those of Chevron declined by 0.7%, which was below its 50 days moving average.
A company is said to have a stable dividend policy if it pays its dividends steadily within the specified period. If a company has a dividend policy, then it is appropriate to conclude that it is important. According to Tom (2020), a dividend policy is essential is because it provides information about the company to investors. If a policy is appealing to, it attracts new investors into the company. It motivates the management to remain disciplined. To ensure dividends are given on a given timeline, it requires a management that is focused. Some stock valuations depend on projected dividends. Based on these findings, one can say that dividends positively influence stock value and prices.
Stock repurchases are transactions done by the company to buy back its shares from the market. They are done in case a company experienced scandals or has had negative earnings over a long period. The action reduces the remaining shares and increases the price and demand for shares. As Ahem (2020) elucidates, share repurchase is mostly used by companies to bring back value to the stakeholders. The main reason why these transactions happen is to allocate capital at that particular time. If a company feels it is undervalued, the management chooses of buying back shares to increase its worth. In addition, a company may make these purchases to increase its financial metrics. For instance, earning per share in the company improves if outstanding shares are reduced. At this stage, the company continues to grow despite having flat earnings.
When a company repurchases its shares there is a significant reduction of available shares in the market. The option of what to do with the shares bought relies entirely on the company. They may decide to cancel or keep them as treasury stock. Outstanding shares are reduced greatly by either decision. Return on assets and equity are also affected in that they increase as both assets and equity are reduced on the balance sheet (Ahem, 2020). When these metrics increase, it gives a good sign about the stocks in the market.