Forget oil price falls! I think a portfolio needs Royal Dutch Shell

Despite the recent crash in oil prices, you should get yourself some dividend-paying Royal Dutch Shell shares.

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.

Global economic growth is slowing. There was the recent US-Iran crisis that got many investors panicking also. Even though oil momentarily shot to about $71 a barrel, now it is almost back to where it was.

Still, in spite of the projected further fall in the price of oil, you might want to consider getting yourself some Royal Dutch Shell (LSE: RDSB).

A dividend king

Shell is a dividend king. Presently, its yield is 6.3%, the highest of the oil companies. Only BP comes close, at just over 6%. Notably, though, there are concerns that the company might have to sacrifice its dividend payments if the price of oil does not hold up in the coming years.

Also, there is the rising long-term debt profile stemming from the 2016 $53 billion acquisition of BG Group and other capital expenses. Nevertheless, a dividend cut is highly unlikely as the company is progressing towards the range of $28 billion to $33 billion organic free cash flow by the end of 2020.

Shell is forging on

Naturally, oil – the “fuel of the world” – is highly susceptible to regular swings in price. For instance, between late 2015 and early 2016 the price tanked, leading to disappointing performances for Shell, ExxonMobil and most of their peers.

Add to that the persistent debates on oil use that have been garnering more support in recent years. Environmental and workplace safety concerns are at the top of the list of the highly scrutinising factors under which the oil industry is becoming increasingly assessed.

As a result of these concerns, the world is making efforts towards deflecting to a lower-carbon economy. In fact, in 2019 in the United States, the rising use of natural gas pushed coal to its lowest demand in more than four decades.

The good news, however, is that Shell is responding quite well to these industry developments. The oil giant is investing heavily in natural gas. In fact, since 2018, its integrated gas business has been the largest contributor to its net income, affirming the company’s dedication to a more renewable-based energy future.

Conclusion

Royal Dutch Shell is properly responding to the changing landscape of its industry. Especially, the company is strongly positioning itself to benefit highly from future growth in renewables. Presently, focusing on solar, it is leading the way in clean energy investments.

In fact, if there is a company that is well poised to benefit from the far-ranging potentials of oil today, it is Shell. And if there is a company that is less probable to suffer if the world completes its transition to a lower-carbon economy, it is also Shell. The partnership with Qatargas, its LNG Canada joint venture and its Prelude FLNG project in Australia, are all lofty attempts towards ensuring that.

Therefore, Shell is as solid as ever. And at its current dividend yield of 6.3%, it makes a good buy if you are an income investor.

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.

Pi De Jonge 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

Investing Articles

After it crashed 25%, should I buy this former stock market darling in my Stocks and Shares ISA?

Harvey Jones has a big hole in his Stocks and Shares ISA that he is keen to fill. Should he…

Read more »

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

How’s the dividend forecast looking for Legal & General shares in 2025 and beyond?

As a shareholder, I like to keep track of the potential dividend returns I could make from my Legal &…

Read more »

artificial intelligence investing algorithms
Investing Articles

Could buying this stock with a $7bn market cap be like investing in Nvidia in 2010?

Where might the next Nvidia-type stock be lurking in today's market? Our writer takes a look at one candidate with…

Read more »

Investing Articles

Is GSK a bargain now the share price is near 1,333p?

Biopharma company GSK looks like a decent stock to consider for the long term, so is today's lower share price…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

Could December be a great month to buy UK shares?

Christopher Ruane sees some possible reasons to look for shares to buy in December -- but he'll be using the…

Read more »

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

Sticking to FTSE shares, I’d still aim for a £1,000 monthly passive income like this!

By investing in blue-chip FTSE shares with proven business models, our writer hopes he can build sizeable passive income streams…

Read more »

Growth Shares

BT shares? I think there are much better UK stocks for the long term

Over the long term, many UK stocks have performed much better than BT. Here’s a look at two companies that…

Read more »

British Pennies on a Pound Note
Investing Articles

After a 540% rise, could this penny share keep going?

This penny share has seen mixed fortunes in recent years. Our writer looks ahead to some potentially exciting developments in…

Read more »