Could an investment in Rolls-Royce shares make me rich?

Rolls-Royce shares have surged above £1 for the first time in nearly a year. Could an investment in the FTSE 100 aero-engine manufacturer make me rich?

| More on:

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.

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.

Image source: Getty Images

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.

Rolls-Royce (LSE: RR.) shares have been a poor investment for the past half-decade. Investors who entered their positions five years ago would be nursing a 66% loss today. Ouch.

Yet the stock’s made a flying start to 2023, lodging an 8% gain to date. It has the accolade of being a top FTSE 100 riser during the first trading days of the new year.

So, could investing in the aviation and power technology pioneer make me rich? Here’s my take.

Improving investment prospects

Civil aviation is the lifeblood of Rolls-Royce’s business. The company is sensitive to international travel demand. This has a significant impact on orders from its customers, including the likes of Footsie airline IAG, which owns the British Airways brand.

In this context, I’m encouraged that the global travel market is recovering at pace, according to the latest data from the International Air Transport Association (IATA). In November, total air traffic reached 75.3% of pre-pandemic levels globally. That’s a 41% rise from 2021.

Another tailwind for the Rolls-Royce share price is rising defence spending in developed countries, prompted by security concerns arising from the war in Ukraine.

The company’s defence arm generated nearly a third of its underlying revenue in 2021. Elevated geopolitical tension should continue to support defence demand in my view.

Source: Rolls-Royce Investor Presentation September 2022

The other major division, power systems, is benefitting from an “exceptionally strong order book“, according to the latest trading update. Rolls-Royce highlights “a record order intake” for 2022 and “good revenue cover for 2023 and beyond“. This sounds promising.

The power systems unit develops climate neutral solutions for standby power used in safety-critical plants and integrated drive and propulsion systems for ships and heavy-duty land vehicles.


I’m concerned by the debt mountain on the aerospace giant’s balance sheet. Its drawn debt outstanding totals £4bn, maturing between 2024 and 2028. This could limit the company’s growth prospects over the coming years.

A key condition of the debt repayment terms was a restriction on dividend payments until 2023. The company last delivered shareholder distributions before the pandemic.

While Rolls-Royce could in theory recommence dividends this year, I expect it’ll be a negligible yield — if anything. This isn’t a stock to buy for meaningful passive income anytime soon.

I’m also worried the company’s extensive cost-cutting measures during the pandemic could hamper its ability to meet production demand going forwards. If so, this could slow any meaningful recovery in the share price.

Can Rolls-Royce shares make me rich?

Despite an improving outlook for Rolls-Royce shares, I’m conscious the company has a history of disappointing investors. Having said that, I see a great deal of upside potential, as well as some notable risks.

Accordingly, I’d temper any expectations of making a fortune from an investment. I’m happy to settle for a respectable return instead.

Rolls-Royce probably isn’t my golden ticket to glorious riches. Nonetheless, I think the stock is an attractive buy for my diversified portfolio. Let’s hope the business breaks the pattern of negative returns and the positive momentum can be sustained.

I’ll prepare for the worst and be pleasantly surprised if the shares can turbocharge my returns in 2023 and beyond. Wish me luck!

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.

Charlie Carman has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

More on Investing Articles

Photo of a man going through financial problems
Investing Articles

Down 15% in a week! What’s gone wrong with the National Grid share price?

The National Grid share price isn't supposed to crash but now it has. Harvey Jones is wondering whether to take…

Read more »

Group of young friends toasting each other with beers in a pub
Investing Articles

Taylor Wimpey just paid me £158.78. I’m aiming to turn that into a £100k yearly second income

Harvey Jones says small, regular dividend payments can turn a few pounds into a mighty second income, if he gives…

Read more »

A pastel colored growing graph with rising rocket.
Value Shares

These FTSE 250 shares are tipped to rise 14% to 18% in the next year!

Looking for the best FTSE 250 momentum shares to buy? Here are two that City analysts expect to soar in…

Read more »

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

Lloyds’ share price is up 20% in 3 months! How high can it go?

Lloyds’ share price has ripped higher recently. Here, Edward Sheldon provides his view on the level it could potentially climb…

Read more »

Investing Articles

Why the Rolls-Royce share price could continue to outperform

The Rolls-Royce share price keeps moving forward, but this Fool thinks it's still behind where it ought to be after…

Read more »

Fireworks display in the shape of willow at Newcastle, Co. Down , Northern Ireland at Halloween.
Investing Articles

The City expects explosive growth in earnings from this almost-penny stock

It’s rare to find earnings predictions as robust as those for this not-quite-a-penny stock, so I’d research and consider it…

Read more »

Investing Articles

As earnings rise 600%, is Nvidia still the best AI stock to buy?

With the supply and demand equation still looking strong for Nvidia, is the stock still the best AI opportunity for…

Read more »

Value Shares

Cheap UK stocks are soaring! Here’s 1 to consider buying now

In recent weeks, many UK stocks have surged. Here, Edward Sheldon highlights a blue-chip FTSE 100 share he believes could…

Read more »