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Royal Dutch Shell Plc Could Help You Retire Early


With the UK economy continuing to experience improving growth prospects, many investors have started the New Year by focusing on the growth rates of the companies in their portfolios.

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Certainly, the financial crisis is not quite over just yet but it should be possible for the majority of companies in a portfolio to expect earnings growth that at least matches that of the UK economy in 2014.

Indeed, retirement may come a little quicker for holders of above-average growth stocks than for those whose holdings are struggling to keep up with the improving (albeit still pedestrian by historical standards) growth rate of the UK economy.

One company that is set to experience above-average growth in earnings in 2014 is Shell (LSE: RDSB) (NYSE: RDS-B.US). Its earnings per share (EPS) figure is forecast to grow by 11% in 2014, as it looks set to make up for what is likely to have been a very challenging 2013.

Such growth rates are well in excess of anything the UK economy can muster, so Shell seems to be a company that is on the up. As mentioned, it had a tough 2013, although the same could be said of 2012 when net profit fell from $31 billion to $26 billion, with Shell still managing to deliver a very respectable return on equity of 14% in 2012.

Indeed, return on equity has been extremely consistent in recent years, even though Shell has arguably failed to set the world alight with its bottom line in many investors’ eyes. Return on equity has averaged over 15% per annum during the last five years, being as high as 20% and as low as 9% in that time.

Although the return on equity range is perhaps greater than expected, a smoothing out of this number highlights the consistency with which Shell can generate relatively high levels of profitability for its shareholders over the long run. It may continue to fluctuate in future but it is likely to remain relatively attractive as an average over the medium to long term.

Such consistently high levels of profitability plus double-digit EPS growth prospects mean that Shell offers a strong case for inclusion in a retirement portfolio. It may not mean you can relax by the pool just yet, but could help you get there just that little bit quicker.

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> Peter owns shares in Shell.

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