In recent weeks the oil industry has been gasping for breath. Today, I’m taking a look at the share prices of BP (LSE: BP) and Royal Dutch Shell (LSE: RDSB) to see how £1,000 invested in either one would have done over the past five years. I’ll also discuss what investors may possibly expect from the two oil giants in the rest of the year.
Year-to-date (YTD), both stocks are down about 27% and 32% respectively, which means the shares are currently in bear market territory.
Reading the numbers
Under each company name below, I state how the price has changed over the past five years and what this change equates to in terms of the compound annual growth rate (CAGR). Then, I show how £1,000 would have fared over five years.
Please note that both companies pay regular dividends that can also be reinvested. But the calculation below does not take into consideration the actual dividend or the reinvestment of that income. Past prices are as of late-April 2015. Current prices are as of mid-day on 9 April.
Finally, I have not factored in any brokerage commissions or taxes.
BP
The share price has decreased from 473p to 340p.
CAGR: -6.3%
£1,000 would have decreased to £722
As a reminder, the CAGR loss of -6.3% does not take into account any annual dividend payments.
At the time of writing, the stock also provides a juicy 9.2% dividend yield and the shares are expected to go ex-dividend next in early May. Passive-income investors may also appreciate that it makes quarterly dividend payments.
As most of our readers will know, a given dividend yield is a function of the share price and the declared dividend pound value. Therefore, as the price has fallen over time, BP stock’s dividend yield has increased.
After declaring no dividends during most of 2010 to pay for the oil spill disaster at the time, the company has been a consistent dividend payer over the past decade and has also increased its payouts regularly.
Understandably, many long-term BP shareholders are wondering whether the group may decide to decrease or even axe its payout. The oil major is expected to release first-quarter results and make a dividend announcement on 28 April. Check The Motley Fool website for further updates at that time.
Shell
The share price has decreased from 2,026p to 1,520p.
CAGR: -5.6%
£1,000 would have decreased to £749.
Shell’s current dividend yield stands at 10.4%. The stock is expected to go ex-dividend in mid-May. Like BP, Shell also makes quarterly dividend payments.
Recent days have seen dividend cuts announced by a plethora of FTSE 100 companies. And holders of Shell shares are also nervous as to the future of the dividend. The group has already suspended share buybacks. It is expected to release first-quarter results and make a dividend announcement on 30 April.
Should you invest in oil shares now?
The recent decline in oil prices and the production war between Russia and Saudi Arabia mean further potential volatility in the share price of both BP and Shell.
How can you keep calm and carry on investing when the both stocks have fallen to multi-year lows? Although it’s quite impossible to know if oil stocks have yet bottomed out, I believe shares of oil companies such as BP and Shell are beginning look quite attractive from a risk/reward perspective.
