Today I am looking at why I consider Royal Dutch Shell (LSE: RDSB) (NYSE: RDS-B.US) to be an excellent choice for those seeking excellent dividend expansion.
Dividends primed to gush skywards
Backed by its formidable cash flows, Royal Dutch Shell has been able to get its progressive dividend policy back on track in recent times following the toil of the 2008/2009 financial crisis. And broker consensus indicates that the fossil fuel giant is in a strong position to keep churning out solid payout growth in coming years.
Indeed, the City’s number crunchers expect Shell to hike last year’s dividend of 180 US cents per share 6.7% to 192.1 cents in 2014. And for 2015 the oil Goliath is anticipated to lift the payment an additional 2.9% to 197.7 cents.
Such projections create inflation-beating yields of 4.4% and 4.5% for 2014 and 2015 respectively. Not only do these figures soar above a 
forward average of 3.2% for the FTSE 100, but a corresponding readout of 2.4% for the entire oil and gas producers sector is also comfortably surpassed.
Current forecasts also suggest that prospective dividends for this year and next are also well protected by earnings — Shell is expected to record growth of 40% and 1% in 2014 and 2015 respectively, to 374.6 cents and 379.2 cents per share. These numbers create dividend cover near enough bang on the security watermark of 2 times prospective earnings.
And Shell’s ongoing divestment programme should galvanise investor confidence in the firm’s ability to keep dividends rolling, at least in the medium term. The business hived off the majority of its holdings in Australia’s Woodside Petroleum just last month for $5bn to add to its already-colossal capital pile — cash and cash equivalents rung in at $11.9bn as of the end of March.
As part of its drive to improve capital efficiency and focus on only the most profitable projects, Shell looks a dead cert to keep the conveyor belt of project sales rolling, a decision emboldened by a backdrop of uncertainty over oil prices and escalating exploration and production costs.
The impact of this aggressive asset shedding undoubtedly raises questions over whether the oil business can keep earnings, and with it, dividend growth surging higher beyond next year. But in the medium term at least, Shell looks a decent bet to deliver solid income flows.
