Despite share price rally Royal Dutch Shell is a ‘buy’

13th April 2015


Helal Miah, investment research analyst at The Share Centre, highlights why he believes Royal Dutch Shell is worth investors’ attention…

As the largest listed company in the UK, Royal Dutch Shell is a sector leader producing fuels, chemicals and lubricants worldwide.

This week, the company confirmed its takeover of BG Group, and to some investors the premium of 50% to the close price prior to the announcement can be considered as high. However, we believe Royal Dutch Shell will continue to be a very good dividend payer for many years and the timing of the acquisition – when oil prices are low – could in hindsight be seen as astute. This acquisition makes strategic sense, adding 25% to Shell’s proven oil and gas reserves and 20% to annual production and lead to annual cost savings of $2.5bn.

The group’s portfolio will undergo major reorganisation in the years to come, which may bring positive rewards to investors in future. The dividend yield in excess of 5.5% remains very attractive and the share price is likely to be supported by a share buyback program.

Despite the fall in the oil price, we continue to recommend Royal Dutch Shell as a ‘buy’ for low risk income seekers. We believe it still represents a core holding for many portfolios due to the relatively stable cash flows and attractive income that it generates.

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