Key Takeaways
- BP’s stock yields 4.7% and Shell’s yields 3.3%, but Shell’s dividend grew 17.4% a year from fiscal 2020 to fiscal 2025, against 0.7% a year at BP.
- Shell’s 17.4% rate starts from a fiscal 2020 dividend of $0.65 a share, down from $1.88 in fiscal 2015, and in fiscal 2025 BP’s dividend rose 7.1% while Shell’s rose 4.3%.
- Both dividends are well-covered, at 31% of free cash flow for BP and 27% for Shell over the twelve months to June 30, 2026.
- What to watch: BP’s plan to cut its hybrid bonds by over $4 billion by the end of 2027, and whether Shell keeps moving cash from buybacks to its dividend.
Anyone hunting for dividend income in Big Oil is going to look hard at BP (BP) and Shell (SHEL). On Oct. 7, Shell guided to 740,000 to 780,000 barrels of oil equivalent a day from Integrated Gas in the third quarter of 2026, up from 631,000 in the second.
Shell has the smaller yield, though: 3.3%, against 4.7% for BP. What it has is dividend growth of 17.4% a year from fiscal 2020 to fiscal 2025. Over the same years, BP’s dividend grew 0.7% a year.
So which pays you more over the next 10 years?
| Metric | BP (BP) | Shell (SHEL) |
|---|---|---|
| Dividend yield | 4.7% | 3.3% |
| Dividend growth, fiscal 2020 to fiscal 2025 | 0.7% a year | 17.4% a year |
| Dividend growth, fiscal 2025 | 7.1% | 4.3% |
| Cash dividend payout ratio, TTM to June 30, 2026 | 31% | 27% |
| Net debt/EBITDA (LTM) | 0.84x | 0.66x |
BP’s big yield comes with a balance sheet to fix
BP’s dividend is well-covered, eating up 31% of free cash flow over the twelve months to June 30, 2026 ($5.06 billion of dividends against $16.14 billion). The trend has been heading the other way, though. Free cash flow fell from $28.9 billion in fiscal 2022 to $11.3 billion in fiscal 2025. Over the same years, dividends paid rose from $4.36 billion to $5.06 billion, so the payout ratio went from 15.1% to a still-comfortable 44.9%.
CEO Marguerite O’Neill is putting the balance sheet first, with a plan to cut BP’s hybrid bonds by over $4 billion by the end of 2027. “Every dollar of capital has to compete, and we need to get fit to grow,” she said on the Aug. 4 call.
LNG is where BP is growing. Deputy CEO Carol Howle said in April that strategic volumes rose year over year to just under 27 million tonnes a year. The risk is costs: in August, management said they aren’t falling fast enough to make BP resilient to low prices.
Shell’s smaller check comes with a promise
BP’s management talks about debt first. Shell’s talks about payouts: 40% to 50% of cash flow from operations through the cycle, in dividends and buybacks. “We are dogmatic about the 40% to 50% through the cycle,” CFO Sinead Gorman said on the July 30 call.
The dividend alone eats up a well-covered 27% of free cash flow over the twelve months to June 30, 2026 ($8.44 billion against $31.55 billion). Free cash flow did fall from $35.1 billion in fiscal 2024 to $23.9 billion in fiscal 2025.
The chart also shows where the 17.4% growth rate starts. Dividends paid fell from $15.2 billion in fiscal 2019 to $7.42 billion in fiscal 2020, and the rate runs from that year’s $0.65 a share. Shell’s latest raises are smaller: 4.3% in fiscal 2025, then 5% in May 2026. Gorman tied that raise to “the confidence we have in the long-term duration of the cash flows of this company.”
CEO Wael Sawan says the pending ARC Resources acquisition lifts Shell’s expected production growth to 2030 to about 4% a year, from about 1%. The main risk is the Middle East, where Shell expects Pearl GTL Train 2 back online by the end of the first quarter of 2027.
So which dividend wins?
BP pays you more over the next 10 years. Take each dividend at its pace now: BP’s 7.1% rise in fiscal 2025 and Shell’s 4.3%. At those rates, $10,000 in BP pays about $6,526 over the decade, against about $4,021 from Shell, and Shell’s income never catches up. (Both pay from outside the US, so each one’s income here is figured in its own currency.)
Shell comes out ahead only at its 17.4% five-year rate, paying about $7,539 over 10 years. But that rate is a rebound from fiscal 2020. At its pace now, Shell’s $4,021 trails even the $4,857 BP would pay growing at its own five-year rate of 0.7%. BP’s 31% payout ratio leaves room to keep raising, though management’s first call on cash is the balance sheet.
Shell’s case is a strong one. Its dividend is a bit better covered, and it carries less debt: 0.66x net debt/EBITDA over the last twelve months, against BP’s 0.84x. Its payout policy is a stated commitment, too. It’s just that a 4.7% yield is too much income to give up for raises of around 5%.
Of course, Gorman described May’s raise as a rebalancing from buybacks toward the dividend. If Shell keeps shifting that cash, its raises could run faster than 5%, and that could change the answer.
So what is BP stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
