Royal Dutch Shell Plc’s 2 Greatest Strengths

Two standout factors supporting an investment in Royal Dutch Shell plc (LON:RDSB).

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

royal dutch shellWhen I think of oil giant Royal Dutch Shell (LSE: RDSB) (NYSE: RDSB.US) , two factors jump out at me as the firm’s greatest strengths and top the list of what makes the company  attractive as an investment proposition.

1. Strong project pipeline

In the recent full-year results statement, Royal Dutch Shell’s CEO said the firm’s momentum slowed in 2013 and it must improve its financial results, achieve better capital efficiency and continue to strengthen its operational performance and project delivery.

That sounds like one of those statements we tend to make when we are pretty sure that such an outcome is set to occur! Indeed, as recently as the time of the autumn three-quarter results report, he reckoned the company has a strong project flow in place for 2014 and beyond that will drive Shell’s cash flow for several years.

Shell’s growth plans could see around 30 major projects add some seven billion barrels of oil, or gas equivalents, which are likely to boost cash flow by $15 billion before the end of 2015 if the oil price holds at about $100 per barrel.

That’s an encouraging growth agenda, which keeps me interested in Royal Dutch Shell.

2. Stable cash flow

Despite 2013 shaping up as a lacklustre year on profitability, Royal Dutch Shell has been good at delivering stable cash flow in recent years:

Year to December 2009 2010 2011 2012 2013
Net cash from operations   ($m) 21,488 27,350 36,771 46,140 40,440

Strong flows of cash make it possible for the firm to reward its investors through the dividend and via an active share repurchase scheme designed to drive up both earnings per share and dividend per share. As the forward project pipeline starts to deliver, it seems likely that cash flow could grow firmer still.

What now?

Having read the runes, I think it seems likely that Royal Dutch Shell will perform well, financially, during 2014 and beyond. As such, the firm looks like a decent bet in the resources space for those investors seeking dividend income.

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.

Kevin does not own shares in Royal Dutch Shell.

More on Investing Articles

Investing Articles

Should I buy more Rolls-Royce shares near 500p?

This investor is wondering whether to buy more Rolls-Royce shares this summer or to just stick with those he already…

Read more »

Investing Articles

After its big fall, is the National Grid share price dirt cheap now?

The National Grid share price fell sharply in reponse to new rights issue plans. But is it an even better…

Read more »

Aerial shot showing an aircraft shadow flying over an idyllic beach
Investing Articles

Starting in June, I’d invest £1,000 a month to aim for a £102,000 second income in retirement

This author highlights a less well-known FTSE 100 stock that could help his portfolio generate a very big second income…

Read more »

Investing Articles

Down 47% in 5 years, is the IAG share price due a bounce?

Many companies in the travel sector have seen fierce rallies since 2020. But with the IAG share price still down…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

Despite its drop, I reckon this is one of the best FTSE 100 stocks to buy and hold!

The FTSE 100 has been climbing in 2024 but this favourite of our writer's has been falling. Despite this, she’s…

Read more »

Investing Articles

AI stocks vs EV shares; which is the best sector for me to invest in?

Jon Smith considers the recent rally in AI stocks and weighs up whether to allocate more money there versus EV…

Read more »

A graph made of neon tubes in a room
Investing Articles

Do Greggs shares have even more growth ahead?

Greggs shares have seen some solid growth in the last few months, as the economy shows positive signs. But is…

Read more »

Investing For Beginners

How I’d aim to grow my Stocks & Shares ISA from £20k to £1m

Jon Smith explains how diversification and focusing on sectors for the future can help grow his Stocks and Shares ISA.

Read more »