Dividend hunters and long-term investors should be taking a serious look at Royal Dutch Shell (LSE: RDSB) because the stock has a bright future. Despite being at the mercy of the oil price the company has said it will keep the dividend at all costs and investors should sleep well knowing this. So is Shell a core holding for any long-term investor?

‘Baby Shell’

As part of deleveraging the balance sheet after the BG Group acquisition Shell is selling non-core assets. This is a good way of streamlining the huge company and raising money to cut high debt levels of $70bn. In the past week news of a possible plan to spin off over $40bn in non-core assets into a new company dubbed ‘Baby Shell’ has emerged. CFO Simon Henry has said that an initial public offering of Shell’s non-core assets is “very much on the agenda”. This, along with $30bn of other divestments, should reduce debt by over $50bn in the next four years, according to an analyst from Exane BNP. These divestments will not only reduce debt but it will ensure the dividend is kept in place. Today, the yield stands at an attractive 7.5%. 

Flexible and refocused 

The divestment programme outlined above is much needed. After the BG acquisition, the enlarged company needs to slim down and refocus to remain a flexible player in the dynamic industry. The large divestment will allow the company to focus on only the best projects that yield the highest rates of return. This will reduce capex and make Shell a much more profitable company when the oil price begins to rise again. Synergies after the BG deal and increased upstream production will also help Shell become a much more profitable company in the long term. Spinning off a ‘Baby Shell’ and keeping some interest in the smaller company would also mean Shell would benefit further from any increase in the oil price. 

Oil price uplift

The oil price has already increased since lows at the start of this year and many analysts expect this to continue over the next few years. We may see some weakness in the second half of 2016 due to the vast amount of oil in storage across the world but it is clear that demand for oil is rising. This increased demand, along with knock on effects from the lack of investment over the last two years, should create an environment in which an $80 oil price may be more appropriate. This uplift would boost company profits and revenues to new heights and the shares would sharply re-rate. 

Overall, Royal Dutch Shell shares offer an attractive opportunity at the moment and I believe the stock will outperform the FTSE 100 over the next few years by some distance. 

Royal Dutch Shell offers great returns if the oil price continues to rise. Investors looking for other long-term stocks should read the Motley Fool's report: 5 shares to retire on.

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Jack Dingwall owns Royal Dutch Shell B shares. The Motley Fool UK has recommended Royal Dutch Shell B. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.