UPDATE 3-French energy group Total joins rivals in lifting shareholder returns

French oil and gas group Total raised its dividend outlook on Tuesday after issuing a positive forecast for its prospects through to 2025, echoing moves by rival energy companies to boost shareholder returns.

Total said it would increase its dividend by 5-6% per year, up from a previous target of 3%, which would result in a third interim dividend of 0.68 euros ($0.75) per share for 2019. The group said its confidence in its general strategy meant it was now forecasting an increase in its cash flow of more than $5 billion by 2025 in a $60-per-barrel oil price environment or an average increase of about $1 billion per year.

Oil majors have been increasingly trying to lure investors with higher returns amid growing pressure to demonstrate concrete action against climate change, and as several high-profile funds decided to sell out of fossil fuel stocks altogether. At its biggest annual gathering in Davos this year, oil industry bosses identified higher returns as one of the main tools to help offset that pressure on their companies.

An anticipated listing of Saudi Aramco is also expected to present a challenge if it sucks out capital from rival energy firms as investors reallocate funds within their shrinking pot for fossil fuel stocks. In June, Total's rival Royal Dutch Shell also outlined plans to boost shareholder returns after 2020.

Total's shares initially rose by around 1% but then slipped back to fall 0.2% by 0851 GMT, tracking a retreat in oil prices which have risen since an attack on Saudi oil facilities earlier this month. Nevertheless, Clairinvest fund manager Ion-Marc Valahu said Total's update was positive for investors.

"Most oil majors have not raised their capital expenditures in recent years but are still generating lots of cash, and the stock prices of most oil companies have been lagging behind the moves in the price of oil," said Valahu, who owns Total shares. Oil prices have been comparatively elevated since the Sept. 14 attack on Saudi Arabia's largest crude processing facility halved output in the world's top oil exporter, with benchmark Brent crude currently near $64 a barrel.

In July, Total said it would sell about $5 billion of assets, mostly from its exploration and production business as it sharpens its focus on low-breakeven projects that can weather any weakness in oil prices. The company said it would maintain its "strong discipline on investment and cost" in the period through 2025.

($1 = 0.9098 euros)

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