Can I be sure of the Royal Dutch Shell share price (LSE: RDSB)?

The Shell share price has almost doubled since its lows of late October 2020. But after such a strong surge, would I buy the stock at today’s prices?

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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

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.

Royal Dutch Shell (LSE: RDSB) is one of the UK’s best-known businesses. The oil & gas explorer and producer has been around since 1907, so it’s 114 years old. And the Anglo-Dutch supermajor’s yellow and red Shell logo (called the ‘pecten’ after the seashell Pecten maximus) can be found across the UK. Also, its advertising slogan “You can be sure of Shell” was familiar to generations of Brits. But with the Shell share price suffering a brutal 2020, can I still be sure of Shell today?

The Shell share price collapses

Thanks to its mega-cap valuation, Shell has always been a super-heavyweight of the UK stock market. At Thursday’s closing price of 1,679.8p, the energy giant is valued at £129.2bn. This places it at #2 by size in the FTSE 100 index. However, the Shell share price has been even higher this year, peaking at 1,714p on 5 October. In spring 2018, the Shell share price was flying high, closing at a record high of 2,841p on 21 May. But the stock weakened to finish 2019 at 2,239.5p. Then the Covid-19 crisis exploded in early 2020 and the stock went into meltdown.

As coronavirus lockdowns were imposed, the price of a barrel of Brent Crude oil crashed from $70 to under $16 in three months. Naturally, RDSB stock followed suit, plunging to a rock-bottom low of 845.1p on 28 October 2020. That’s a loss of close to £20 a share in two-and-a-half years (and a collapse of 69.5% from RDSB’s all-time high). Writing about Shell on that very day, I said I was sure Shell would be well. My buy call turned out to be perfectly timed, as the Shell share price has roughly doubled (+98.8%) in less than a year. But that was the past and investors must look to the future. So can I be sure of Shell today?

Shell is a pure-play on energy prices

The surge in the Shell share price is largely down to skyrocketing energy prices. A barrel of Brent Crude oil costs $81.86 today, up 80% in 2021 and close to its three-year high of $83.47. Likewise, the price of gas has exploded. In August, natural gas cost around £1 a therm. Yesterday, it peaked at over £4 before falling back from this all-time high. Also, Shell has been cutting costs and selling assets. Thus, much of the extra profit from higher energy prices drops straight into its bottom line.

Then again, Shell is very much an old-school energy business. It’s also a major contributor to global pollution and rising CO2 levels causing climate change. This makes its shares unwanted by ethical and environmental investors. That said, based on the current Shell share price, the stock offers an above-market dividend yield of 4.2% a year. What’s more, this is covered a healthy 2.9 times by earnings. But the group cut its dividend in 2020 and might do so again if energy prices crash in future. Hence, I expect the stock to stay fairly volatile over 2021/22. Though I don’t own RDSB at present, I’d buy at the current share price to add extra income to my portfolio. In short, I think I can be fairly sure of Shell for now!

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.

Cliffdarcy 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.

More on Investing Articles

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »