What’s Telling Me To Buy Royal Dutch Shell Plc Today

Royston Wild considers the investment case for Royal Dutch Shell plc (LON: RDSB).

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Today, I am looking at Royal Dutch Shell (LSE: RDSB) (NYSE: RDS-B.US), and deciding whether to boost my own shares basket with the black gold heavyweight.

Shares looking oversold following August update

Shares in Shell have ducked 6% in just under two weeks, after the firm’s first-half financials released at the turn of the month shook investor confidence in the firm. But I believe that this recent dip sweetens the investment case for opportunistic investors.

Shell announced that, on a current cost of supplies basis, earnings fell to $4.6bn in April-June from $5.7bn in the corresponding period last year. The company cited a combination of higher costs, adverse forex movements and a variety of operational problems in Nigeria as crucial factors in the financial deterioration.

Still, the firm has a history of printing quarterly fluctuations — for both good and bad — and I believe that the firm offers a compelling investment case for the medium term onwards. Shell is in the process of restructuring the firm and divesting non-core assets, while it has also devoted between $120bn and $130bn through to 2015 for further capital expenditure. This should give earnings a solid boot in the right direction.

Stunning dividends at decent value

Broker Liberum Capital expects earnings per share to edge 1% higher in 2013, to 404 US cents, before accelerating to 5% the following year to 425 cents. This translates to a P/E rating of 8.4 for this year, far below the oil and gas producers’ average of 23.4, and is anticipated to fall to 8 in 2014.

Shell is a popular pick among income investors owing to the plump dividends on offer, and the company’s financial strength that enabled it to maintain the payout even as collapsing oil prices whacked earnings following the 2008/2009 banking crisis, unlike many of its fossil-fuel rivals.

And Liberum expect Shell to raise last year’s payout from 172 cents in 2012 to 180 cents this year and 188 cents in 2014. These prospective dividends carry yields of 5.3% and 5.6% respectively, way ahead of the 3.1% average for the UK’s 100 largest-listed firms and smashing the 2.8% forward readout for its oil sector peers.

Get ready for gushing dividend income

So in my opinion Shell offers stock pickers a fantastic opportunity to latch onto fat dividends at a reasonable price. And if you like the look of the oil leviathan then you should check out this brand new and exclusive report, which details even more FTSE 100 winners designed to significantly bolster your investment income.

Our “5 Dividend Winners To Retire On” wealth report highlights a selection of incredible stocks with an excellent record of providing juicy shareholder returns. Among our picks are top retail, pharmaceutical and utilities plays which we are convinced should continue to provide red-hot dividends. Click here to download the report — it’s 100% free and comes with no further obligation.

> Royston does not own shares in Royal Dutch Shell.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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