|New Threads Only:|
|New Threads & Replies:|
Forum List » Value Ideas and Strategies|
Share and discuss value investing ideas and investing strategies.
Royal Dutch Shell Class A and Class B Shares Are Gem Stocks to Buy
Posted by: Muhammad Bazil (IP Logged)
Date: August 23, 2012 11:22AM
Royal Dutch Shell Plc is an oil and gas company that operates globally. Royal Dutch Shell trades in the stock markets under two classes of shares as Royal Dutch Shell (RDS.A) & Royal Dutch Shell (RDS.B). The Class A and Class B shares have identical rights for investors except that in relation to dividend access classification, Class B shares do not come with 15% withholding tax from the Dutch government and they offer the most ideal option for US investors. You could gain a better understanding of the differences between the two classes of shares here.
Royal Dutch Shell is a good dividend stock that has paid solid dividends regularly for many decades. The annual dividend payouts of Royal Dutch have increased by an average of 12 percent in dollar terms since 2000. The company has been able to double its dividend payouts every eleven years on average. The Royal Dutch Shell Company is one of the largest global oil refiners with a record refining capacity of 3.2 million barrels per day, next to Exxon Mobil (XOM), which maintains the first rank as the largest oil refiner in the world with a refining capacity of about 6.3 million barrels per day.
Many investors are wary of investing in oil stocks, mainly because issues like market volatility, rising inflation, tension in different parts of the world, and a drag in the economic activities of emerging markets are all capable of disturbing operations of oil companies, but Royal Dutch Shell, Exxon Mobil, Chevron Corporation (CVX) and BP (BP) are all stocks of giant oil companies that are growing stronger in their respective positions. Chevron keeps a balanced string of resources among its asset classes and it has a strong cash flow system which helps the company to preserve its shareholder values through a share buyback scheme and generous dividend payouts. BP is ranked first in the industry in terms of sales, and Exxon Mobil has a track record of providing stability to investors even in a period of volatile energy prices. In addition, these oil companies are known for their capacity to manage inflation pressures for the benefit of their shareholders.
Like other major oil companies, the earnings of Royal Dutch Shell Company have been helped since 2000 by the increase in the prices of crude oil and natural gas. In particular, Royal Dutch has managed to deliver an average of 1.1 percent annual increase in its earnings per share for over a decade. However, the earnings of the company decreased by about 52 percent in 2009 due to the global decline in energy prices in 2008 and early 2009. The company grew its upstream earnings by 53 percent in 2011 aided mainly by higher LNG sales volume, higher prices for oil and gas, reduced impairment and higher contributions from its trading concerns. In the downstream, its earnings in 2011 rose by about 45 percent due to improved trading contributions, reduction in operating expenses and increase in chemical margins. In the first half of 2012, Royal Dutch Shell generated a free cash flow of $12.6 billion. In 2010 and 2011 fiscal years, Royal Dutch recorded increases of 34 percent and 27 percent respectively in its cash flows generated from its operations.
As a good dividend-paying company, Royal Dutch Shell keeps healthy balance sheets and its management remain eager to offer generous dividend payouts in order to attract new investors. Indeed, investing in good dividend stocks like Royal Dutch Shell gives investors many advantages in addition to the flexibility it adds to one’s portfolio. Royal Dutch Shell rewarded its shareholders with $10.5 billion through cash dividend payments and shares (optional) in 2011 and it bought back 34.4 million shares to offset any dilution.
The stock of Royal Dutch Shell trades at price earnings multiple of 7.9x, considered to be cheap compared to its direct competitors. Also, the company offers the highest dividend yield of 4.5 percent in comparison to its peers. Looking at all these encouraging statements, I believe keeping a positive stance on Royal Dutch Shell stock is a wise idea.
Stocks Discussed: RDS.A, RDS.B, XOM, CVX, BP,