Royal dutch shell shares b

After I explained the BHP vs BBL shares for BHP Billiton , I realized I may as well dive into the complexity of the Royal Dutch Shell Class A vs Class B shares.

Royal Dutch Shell B share price (RDSB) - The Share Centre

For those of you who like to understand the actual structure of things, today is your lucky day. Back in , the European oil powers grew nervous over John D. Rockefeller setting his sights on their shores. Two competitors decided to join forces and create a powerhouse that would rival Standard Oil and keep the titan on his side of the pond. The two companies were N. Koninklijke Nederlandsche Petroleum Maatschappij in The Netherlands, and Shell Transport and Trading Company Ltd in the United Kingdom.

Koninklijke Nederlandsche Petroleum Maatschappij in The Netherlands, were delisted and merged under a new, parent company that was created to own the energy conglomerate.

There was now only one business, called Royal Dutch Shell. It was registered in England and Wales, headquartered in The Netherlands. Royal Dutch Shell headquarters in The Netherlands. Image courtesy of P. To make the shares widely available to investors, Royal Dutch Shell then created 6 listings in 3 countries. The Netherlands On the listings in The Netherlands, the stocks both trade in Euros.

Dividends are paid by default in Euros on the Class A shares and Pound sterling on the Class B share, though you can elect for the other if you prefer. Great Britain On the listings in London, the stocks both trade in Pound sterling. New York To make it possible for investors in the United States to own shares in the company, Royal Dutch Shell worked with an investment bank, The Bank of New York Mellon, to create a special type of financial instrument.

It deposited shares of the Class A and Class B stock with the bank, then issued receipts against these as proof that they were there called American Depository Shares, or ADS. Those ADS were these packaged into new securities called American Depository Receipts or ADR. Each ADR represented 2 shares of the underlying Class A or Class B stock.

Dividends are paid in United States dollars. To summarize again, all in one place, this means if you wanted to buy stock in Royal Dutch Shell, your options were:. The Class B shares were subject to no withholding from the Dutch Government, while the Class A shares were unless you were exempt through some special loophole.

This effectively lets an investor in Royal Dutch Shell select whichever is most beneficial for him or her. You can receive Euros, Pound sterling, or U. You can have Dutch withholding taxes taken out of your dividends or not. This is a problem because the IRS in the United States will not let you claim those taxes you paid against your income since they are held in a tax shelter. That means you just lost the money. The fresh funds show up constantly throughout the year, unrestricted, sitting there, waiting for me to put them to work in other securities or investments.

There is a rare set of circumstances in which the Class A shares are better for American retirement accounts. For investors in the United States, if you are buying Royal Dutch Shell through a regular, taxable brokerage account, it matters much less whether you select the Class A or Class B ADR. If the Class A ADR look like a better deal at any given moment, you can get around the Dutch withholding tax by signing up for the Scrip dividend program.

Basically, Royal Dutch Shell will agree not to send you any cash, and instead, deposit additional shares of the Class A ADR as a stock dividend into your account. For some investors, in some countries around the world, you can use the Scrip dividend program to defer taxes on your Royal Dutch Shell dividends for years when held in a regular taxable brokerage account; even decades. Were us Americans only so lucky. The sharp-eyed accountant types out there have just had a blinding light bulb go off over your head.

Go ahead and let out the scream. Get it out of your system. For example, at this very moment, the Class A shares yield 4. Back out the dividend withholding tax 4. That is your adjusted dividend yield.

Compare that to the dividend yield on the Class B shares of 5. It could add up to many thousands of extra dollars simply because you paid attention at the time of your initial purchase. In terms of dollars: If you use the Scrip program to sidestep the Dutch dividend withholding tax, and you are exempt from U.

My approach is different. I pool my dividends at the bottom of the accounts, and mix the money with fresh deposits. That combined pile of capital is then redeployed based on the best opportunities I see at the moment. That is the approach I take for most of the family member accounts I control. For regular taxable brokerage accounts, I think Royal Dutch Shell should create a special Class C ADR for Americans that only distributes dividends in the form of additional shares, rather than giving the investor the option of receiving cash.

It would create a large tax advantage for investors in the United States, who could convert dividend taxes into deferred capital gains. At this point you may be wondering why there is so much complexity.

Royal Dutch Shell is enormous.

Royal Dutch Shell Class A vs Class B Shares

It is truly a multi-national in every sense of the word and transcends countries. There are very few parallels for an enterprise of this scope in the annuls of human history.

Structuring itself this way gives the various constituent shareholders what they want most — local access to a liquid market for the stock, dividends in a native home currency, and the option to select the most tax efficient method of ownership. So many societal advancements came about because of the scientific efforts of the engineers and chemists at this company, who were also involved in advanced chemicals, polymers, distribution, and logistics; discoveries and innovations that reached far beyond the petroleum and natural gas industries.

This may be a dumb question, but, where is more info on the scrip dividend program? I have a Roth IRA with RDS. A instead of RDS. I thought one class provided greater voting rights versus the other. Either way, thanks for such a fantastic explanation. You are truly a gem for educating people like me such complex subjects in a way that is easy to digest. Seriously, thanks a ton. Here is a PDF booklet on the Scrip Dividend Program for U.

Here is a PDF booklet on the SCRIP Dividend Program for global investors who own the regular Class A or Class B shares traded directly in London or Amsterdam. It sounds like you own the ADRs, so that first one should answer your questions.

This is a very interesting article Joshua. I do like these articles you posted, and do not think they are over my head. Of course, I deal with investments a lot, so my opinion might be skewed. Hi Joshua, I came across this blog through Google search on difference between RDS. But I am confused somewhat. On Google page, both RDS. A as well as RDS. If I buy RDS. A through my k account, will I have to make an election every quarter to receive the dividend in stock, rather than cash?

Also, how do I tell TD Ameritrade that I want to enroll for SCRIP Dividend Program to avoid Dutch withholding tax? Finally, do you know if RDS.

A can offer fractional share as dividend? This is intellectual porn for me, I love it haha. I wish you wrote in-depth like this on more subjects more often. I left a comment in a recent post about not being able to purchase shares of RDS. A or B through my Roth IRA. For whatever reason, even though the RDS. B is listed on the NYSE, when I try to pull up the stock quote and attempt to purchase an order, no information comes up and I get an error.

I contacted them once again and am waiting for a reply to help me with the issue. I want to own some at such great value! This is the sort of stuff that makes my heart flutter and my brain start looking for exploits. You and I are a tiny minority on this, I think. As to your question: Give the alternatives a try and let me know what happens. Is this a mainstream brokerage firm?

I have never encountered such a thing. A few seconds ago, I just added a few paragraphs to the end of this article explaining how you could exploit a loophole to use the Class A shares to get a bigger yield in a Roth IRA or comparable retirement account. B for the long-term.

B or RDS-B depending on the broker. I spoke with a supervisor afterwards and was told: Clients looking to participate in a special election will just respond to our notices that we send when they come due. Usually these are sent weeks before the ex-dividend date for the dividend. The client would need to reply to the email correspondence confirming their choice in the special election for the dividend.

Special election dividends are not eligible for DRIP, so you would need to let us know that you are opting for the stock dividend when offered by the issuing company. Can anyone shed some light on this for me? Everything is strange and over your head until you learn it.

Could you effectively do the same thing even using the class A shares? Buy the class A shares and enroll in the scrip dividend program, then just sell off the excess shares as they are deposited into your account.

Although just out of curiousity, what would be the basis of the stock dividend shares?

It seems the only counter to this would be if the IRS said that the sale was effectively the equivalent to a cash dividend and taxed you on it anyway. You would have to weigh the frictional costs paying commissions against the value of the discount. While it may make sense if you have a large enough stake, the discount is a one-off benefit, against a perpetual stream of frictional expenses. Also — According to MSN Money — RDS.

A currently has a 4. MSN Money must be using some delayed share price to calculate the yield. A yield of 4. Joshua — this is a fantastic explanation. I am a big fan of your blog.

I have read most of your articles even the cooking ones!! Thanks for the great work you are doing in educating the masses. Thanks for the article. Appreciate what you do. A shares and scrip dividend program, a U. IRA investor would need a minimum amount of shares to reap most of the tax benefit. It appears that Shell only applies the cash dividend equivalent towards whole shares.

The rep at my brokerage claimed it could be done, but you never know. Joshua, I enjoy your blog a lot, thanks for putting so much effort into it. B shares in a tax-sheltered retirement account if they were available to me in my home country Austria which they are unfortunately not and does prevent me from holding any British stocks on my company books, instead opting to hold them privately in fully taxable accounts.

The UK corporation tax used to be an imputation system until , meaning that a natural person receiving a dividend also got an income tax credit that represented the corporation tax already paid on the profits out of which the dividends are paid, so profits were essentially taxed once at the level of the natural person, with the tax paid by the company only being an advance withholding tax. I love the UK. It is the only country I know of that does this. I am not sure if the IRS in the US will recognize the UK tax credit, but within the EU it should be possible to use the tax credit to offset the tax liability just like the more common withholding tax is used to do so.

Some governments might be more cooperative in recognizing the tax credit than others, but from my personal understanding of EU law you should have a right to this in any EU country.

Here is how it works in Austria:. In the case of the UK however Austrian banks credit you with In the case of RDS. B which payed a 0. It might make sense to keep the stocks in a company if the money is left there for a long time, since the untaxed 45 cents have more compounding power, but because I also want to hold stocks from other countries the proper allocation is to put British stocks into private ownership and stocks from other countries into the company.

I dont get it. You can find information on this at the shell website in the dividend section: Shareholders resident in the United Kingdom, receiving cash dividends on B Shares through the Dividend Access Mechanism, are entitled to a tax credit.

This tax credit is not repayable. Non-residents may also be entitled to a tax credit, if double tax arrangements between the United Kingdom and their country of residence so provide, or if they are eligible for relief given to non-residents with certain special connections with the United Kingdom or to nationals of states in the European Economic Area.

To whomever it may concern: The tax credit — unfortunately — does not exist anymore. In early the UK has an income tax reform and eliminated the tax credit.

Foreign investors are also affected as a side effect of this the reform was written for UK tax residents. Long time since this was posted but in light of brexit and the uk a shares declared and paid in euros unless requested otherwise does this mean they have euros deposited in the uk or pounds and they change pound euros.

With an 10 per cent dev by the brexit vote this seems significant. Also if the former what does this do to the UK primary income debit. If you have a decent broker then multiple currencies are supported and EUR dividends stay in EUR.

Some brokers may require you to open a dedicated subaccount in that particular currency beforehand, for other brokers it is fully automatic and currencies just show up in your universal account. If your broker automatically changes the currency of your dividend there is a high chance that they will give you a bad exchange rate and high commissions on that currency exchange.

Brexit and the GBP move have no direct significant consequence for future Shell dividends. Shell declares its dividend in USD remember, the oil business is dollar based and has a policy to grow the absolute USD amount of the dividend.

The EUR and GBP dividend are based off the declared USD dividend amount, so a weaker pound will mean an increased GBP dividend, but you still get the same purchasing power looking at it from a USD perspective.

You might have some increased purchasing power with that shell dividend for some time if you live in the UK and purchase local groceries whose input costs are in GBP, but not if you refill your UK heating oil container since that price is USD based, as is your shell dividend. Since oil is a dollar business, you should look at your Shell dividends as dollar income, no matter what currency is happens to be paid in. To help offset bandwidth costs and other expenses of running a successful blog, the site now features affiliate referrals that convert words into affiliate links that pay us for the transaction.

For more information, or if you run a website and want to sign up yourself, visit VigLink. Skip to content Search: Rss YouTube Pinterest Twitter. Thoughts on Business, Politics, and Life from a Private Investor. Royal Dutch Shell Class A vs Class B Shares. Royal Dutch Shell Used To Be Structured in a Similar Way to BHP Billiton Back in , the European oil powers grew nervous over John D. A Rare Color Video of Disneyland Opening in Next Next post: BHP vs BBL for Investors in the United States.

No problem; glad to help. Here is how it works in Austria: Quote from the website: Letter from a Birmingham Jail by Dr. Martin Luther King Jr. We Bought a New Car.

Epiphany Moments that Change Your Worldview November 20, Since , Joshua Kennon has been the Investing for Beginners Expert at About. In the going-on two decades since he first published for the network, he has built up a body of work of more than 1, articles, essays, and lessons that are available to read for free, covering everything from how to analyze a balance sheet to strategies for portfolio risk reduction. More formally structured than the content on this personal blog, they are a fantastic introduction to the basics of wealth building and asset management for new and experienced investors alike.

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