As Shell shares hit a record high, am I too late to buy?

Shell shares have surged to an all-time peak, driven upwards by a rising oil price. And with war raging in the Middle East, should I buy now?

| More on:
Two white male workmen working on site at an oil rig

Image source: Getty Images

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.

Since 30 December 2022, the UK’s elite FTSE 100 index is up a mere 2.3% (excluding cash dividends). Meanwhile, the US S&P 500 index is up 12.7%, again ignoring dividends. Yet some UK stocks have done even better, including Shell (LSE: SHEL) shares.

Shell shares surge and soar

How I regret not buying Shell stock during the depths of 2020/21’s Covid-19 crisis. When lockdowns and social restrictions were introduced across the globe in spring 2020, the oil price collapsed. As a result, the share prices of major oil & gas producers crashed.

On 28 October 2020, Shell’s share price bottomed out at 878.1p, before rising to close at 900p. Anyone buying during these pre-vaccine lows would have made out like bandits.

As I write, Shell shares trade at 2,761p, just 6.5p short of their all-time high of 2,767.5p, hit earlier this afternoon (on Monday, 16 October).

This values the Anglo-Dutch oil & gas supermajor at a whopping £183.4bn, making it the largest member of the FTSE 100. It also means that this group alone accounts for around 9% of the Footsie’s total market value of roughly £2trn. Wow.

The only way is up?

Since autumn 2020, the Shell share price enjoyed strong momentum as the global economy rebounded. Indeed, anyone buying at 2020’s low would have more than tripled their money, with the stock up 314.4% since then. Nice.

However, while this popular and widely held stock is up 21.7% over one year, it has gained just 9.4% over five years (all figures exclude dividends).

Hence, perhaps this stock is not overpriced today, despite hitting record highs? Then again, as one old stock-market saying warns, “trees don’t grow to the sky”, while another adds, “dinosaurs don’t gallop”.

In addition, Shell runs a dirty, polluting business, putting its shares out of favour with ESG (environmental, social, and corporate governance) investors. And climate-change protestors such as Just Stop Oil are waging a PR war against it and other petrochemical giants.

Shell doesn’t look expensive today

At current price levels, this FTSE 100 mega-cap stock trades on a multiple of 8.2 times earnings. This translates into an earnings yield of 12.2% a year, versus 9% for the wider Footsie. But the oil price is notoriously volatile, just as producers’ share prices can be.

What’s more, Shell’s dividend yield trails the wider market at 3.4% a year, versus close to 4% for the FTSE 100. But the good news is that this payout is covered a healthy 3.6 times by earnings, offering plenty of scope for future uplifts.

Summing up, should I buy into Shell today? To be honest, I would like to, but my wife and I already added BP shares to our family portfolio in mid-August. Besides, it was tough enough back then to convince my better half to own one polluting energy company, never mind another.

Therefore, despite its attraction as a potential value stock and dividend Goliath, I won’t be buying Shell shares right now. But I’d like to, not least as a hedge against my ever-rising energy bills!

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.

Cliff D’Arcy has an economic interest in Shell shares. 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

Surprised Black girl holding teddy bear toy on Christmas
Investing Articles

4 penny stocks I’d love to buy for my Xmas stocking!

I'm hoping to buy these top penny stocks when I next have the opportunity. I think they could be some…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

Why I believe the lagging FTSE 250 is a rare opportunity to buy cheap shares now

The FTSE 250 is showing some attractive numbers and they suggest some cracking value among businesses listed in the index.

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

Is this FTSE 250 TV giant one of the best opportunities on the market right now?

A staple name among UK television lovers, this FTSE 250 stock has fallen substantially. Is it time to buy the…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

Could this 2.5% yielding penny stock soar in 2024 and beyond?

This penny stock has struggled throughout 2023 but could the new year provide it with a much needed positive momentum…

Read more »

Number three written on white chat bubble on blue background
Investing Articles

Just released: the 3 best growth-focused stocks to buy in December [PREMIUM PICKS]

Our goal here is to highlight some of our past recommendations that we think are of particular interest today, due…

Read more »

Close-up of British bank notes
Investing Articles

With £500 I’d start a passive income portfolio with these UK shares

Owning shares in an established business can be a great source of passive income. And Stephen Wright thinks now is…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

I’d buy these FTSE 100 and small cap stocks in 2024 to target a second income!

This FTSE share offers a 6% dividend yield and trades on a rock-bottom P/E ratio. Here's why I'll buy it,…

Read more »

Investor looking at stock graph on a tablet with their finger hovering over the Buy button
Investing Articles

Here’s one excellent FTSE 100 value stock investors should consider buying

Sumayya Mansoor explains why this packaging giant is currently in value stock territory and should be on investors radars.

Read more »