The Motley Fool

2 high-yielding FTSE 100 shares I’d buy before the price of oil rises again

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.

Image source: Getty Images.

The worrying situation in Iran and the escalating tensions in the Middle East have pushed up oil prices around the world. Investors who bought energy shares over the past few months are sitting on handsome gains, but here at the Motley Fool, we like to take a longer-term view of investing 

It’s worth noting that the price of oil has only shifted along with investor sentiment but for the moment, the supply-demand dynamics of the actual commodity remain unchanged. This means the price could escalate much higher if the supply chain is disrupted or certain countries start hoarding oil strategically. 

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

In this scenario, I believe two FTSE 100 energy companies could be more in demand, but I like them now for their high yields and determination to become more efficient businesses. 

Royal Dutch 

Royal Dutch Shell (LSE: RDSB) shares have gained nearly 3.9% over the past five days in response to the current situation, but I have to say that I feel it deserves to trade higher anyway. The oil giant was clearly trading at a discount not too long ago. Now the price has caught up to the behemoth’s long-term fundamentals, while the dividend yield remains impressively high at 6.2%. 

After a year of selling off assets in the Middle East and tightening its belt in anticipation of lower oil consumption, Shell is now a much more efficient energy producer and distributor. My Fool colleague G A Chester forecast 25% earnings per share growth and a price-to-earnings growth (PEG) ratio of 0.4 for 2020. 

However, he made his predictions in mid-2019. Since then, the price of oil has moved higher while the number of Shell shares outstanding has dropped as a result of buybacks. The company’s cash flow for 2020 could be higher than anticipated. In other words, the shares are more valuable now, making it the perfect time to add this heavyweight to your watch list.  


BP (LSE: BP) is another key beneficiary of higher oil prices. The shares are up 6.4% since the start of the year, while the dividend yield remains attractively high at around 6.5%.

My Fool colleague Paul Summers estimated a dividend of 32p for 2020, which he says is covered 1.4 times by estimated earnings for the year. However, he made those predictions when the price of Brent Crude was hovering around $64, while the current price is nearly $70. 

In other words, BP’s growth and dividend coverage could be better than expected, making the share an undervalued income opportunity for yield-hungry and risk-averse investors like me. 

What I like about BP, beyond its robust dividend and attractive valuation, is the fact that it is also transitioning to a more diverse business model by adding renewable energy to the mix. The company is already one of the largest natural gas suppliers in the world and has deployed hundreds of millions into acquiring wind farms across the US. 

Foolish takeaway

Oil and gas giants like Royal Dutch Shell and BP are in an interesting position in 2020. They’ve spent years reducing their costs and making their operations efficient and when the oil price rises, they benefit. We all hope the conflict with Iran can be resolved soon and even if the oil price dips again, I still see these two firms as worthy investments.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

VisheshR 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.