Never sell Shell? I just sold my RDSB shares

Edward Sheldon just sold his shares in Royal Dutch Shell (LON: RDSB). Here, he explains why he dumped the oil giant from his investment portfolio.

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With equity markets up significantly from their Covid-19 lows last year, I have recently been selling a few of my holdings in order to concentrate my portfolio on my best ideas. Royal Dutch Shell (LSE: RDSB) is one stock I’ve sold.

Here, I’m going to explain why I sold Shell. I’ll also explain where I’m planning to invest the proceeds of my sale.

Shell shares: why I sold

There are two main reasons I sold my Shell shares. The first is in relation to the dividend. One of the reasons I bought Shell shares a few years ago was that the company was a reliable dividend payer. Up until Covid-19, Shell had not cut its payout since WWII. The stock had an attractive dividend yield too. I had been receiving a yield of 5%+ on my shares.

Last year however, the company cut its dividend by nearly 70%. After this cut, my income stream was reduced significantly. And now that the long-term track record has gone, there’s more uncertainty in relation to future payments.

I’ll point out that Shell does still pay a dividend today. And recently, it announced an increase to the payout. That’s a plus for investors. However, in my view, Shell’s attractiveness as a dividend stock has been reduced considerably after last year’s cut.

The second reason I sold Shell shares is that since I bought them, sustainability has become far more of a focus. 

There are several issues here. The first is that Shell now faces considerable structural challenges. It is making some moves into renewable energy, however, if it doesn’t do more, it could end up stuck with a portfolio of assets that aren’t relevant in today’s world.

The second issue is that, with many institutional investors adopting an ESG focus, demand for Shell shares may not be as high as it was in the past. This could limit its share price upside.

I think we’re already seeing this today. Recently, the price of oil has risen to where it was pre Covid-19. Yet Shell’s share price hasn’t recovered. It’s still around 30% below its February 2020 levels.

If Shell can show that it’s serious about sustainability, sentiment towards the stock could improve. However, right now, it’s pretty clear that many institutions are avoiding the oil giant.

My loss on Shell shares

I did take a loss on my Shell investment. My average purchase price was around £23 and I sold out for £13.20. I’m not too concerned about this loss. For starters, I’ve received some big dividends since I bought the stock, which have offset the loss. Secondly, it was not a huge position in my portfolio. Third, I have had some excellent gains in recent years from stocks such Apple and ASOS that have more than made up for the negatives here.

My next move

As for what I’m doing with the proceeds of my Shell sale, right now I am just sitting on the cash. I’m hoping we’ll see a market pullback in the near future that will throw up some opportunities.

When that happens, I’ll be looking to deploy my cash into companies in growth industries such as cloud computing, payments, and e-commerce. I figure that for a long-term investor like me, these industries are likely to provide more opportunities than oil.

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.

Edward Sheldon owns shares in Apple and ASOS. The Motley Fool UK owns shares of and has recommended Apple. The Motley Fool UK has recommended ASOS and recommends the following options: short March 2023 $130 calls on Apple and long March 2023 $120 calls on Apple. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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