Royal Dutch Shell is making a change that should pay dividends. The U.K. oil and gas major Thursday axed its scrip dividend program, under which shareholders could chose to receive their payouts in stock rather than cash.The move--which ends an inefficient state of affairs created by Shell's dual share structure and Dutch tax rules--should save the company money. As important, it suggests Shell is feeling confident about its cash flows.Economic theory would tell you that a company's value is unaffected by how it finances its operations or its dividend policies. In reality, taxes, others costs and asymmetric information upset the economists' logic. In Shell's case, there were clear disadvantages to its scrip dividends. Shell bought back shares to offset partially the dilution from paying dividends in stock. But under Dutch rules, such buybacks would be treated as a form of payout and taxed.So Shell stuck to buying back its B-shares, rather than the A-shares subject to Dutch withholding tax. Over time, that created a disparity between the two stock prices: Shell's B -shares were trading at an 8% premium to its A-shares at Wednesday's close. Being forced to buy back the more expensive stock cost Shell some $450 million last year, estimates RBC Capital Markets.Scrapping the scrip has other benefits. Shell should now be able to repurchase both classes of stock. Shell said it planned to buy back shares to offset past dilution, which Jefferies reckons amounts to an additional $5 billion in returns to shareholders over the next two years. Removing the scrip constraint could also make it easier for Shell to ramp up investors returns in the future.But handsome payouts are unlikely until Shell's cash flow position has markedly improved. The company's operating cash flows last year fell well short of covering its capital spending and dividend payouts.In that vein, Shell's move could be a signal of better times. Shell's scrip program saved it roughly $3 billion in cash distributions each year, about a quarter of its total dividend payouts. That neatly matched the potential hit to Shell's cash flows from a $10 fall in the oil price and, the company argued, provided a buffer against price or operational weakness.The fact that Shell is ready to give up that protection could auger well. For investors, seeing an oil and gas sector committed to living within its means might be the best pay back of all.