Investor sentiment towards the Shell (LSE: RDSB) share price has deteriorated significantly over the past six months. As investors have become concerned about the outlook for the group, they’ve pushed the stock down to 1,250p.
However, despite this performance, the company’s long-term outlook remains attractive. As such, now could be a good time for long-term investors to snap up the Shell share price while it trades at a depressed level.
Shell share price on offer
Investors have been selling the Shell share price this year for a multitude of reasons. For a start, the price of oil has plunged in value as demand for the black gold has collapsed. On top of this, the company has had to cut its dividend to preserve its balance sheet. For investors who’ve relied on the group to provide a steady stream of dividends in the past, this came as a complete shock.
Nevertheless, despite these headwinds, the Shell share price appears to have a bright future. While it’s clear the world is moving away from oil and gas towards cleaner fuel sources, this doesn’t mean Shell is nearing the end of its life.
The group is spending tens of billions of dollars diversifying its operations. A key pillar of this strategy is turning the company into one of the world’s largest energy providers. This includes both traditional hydrocarbon and renewable energy.
To this end, the group has recently signed a significant renewable energy supply agreement with one of the largest financial institutions in the US. It’s also launched a retail energy business in the UK, an offshore energy partnership, and signed biogas supply agreements. These are just some of the efforts the company is pursuing to secure its future. Progress on this front could help improve investor sentiment towards the Shell share price.
And while income investors may see the dividend cut as a black mark against the business, the reduction will free up cash for more green energy investment. In terms of the long-term potential of the company, that seems to be a sensible trade-off.
Even though the Shell share price doesn’t offer the same level of income as it did at the beginning of the year, the stock remains a FTSE 100 dividend champion. The dividend yield is currently 6%, which is extremely attractive in the current income environment. It also suggests that, as investor sentiment improves, the Shell share price could rise significantly from current levels, thanks to its income credentials.
As such, at 1,250p the Shell share price may be an excellent acquisition for a diversified portfolio. The firm’s green energy efforts and dividend credentials suggest it could produce high total returns for shareholders. That’s despite the near-term headwinds facing the enterprise.
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Rupert Hargreaves owns shares in Royal Dutch Shell. 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.