You are here: Home - Investing - Experienced Investor - News -

Stock of the week: Royal Dutch Shell

Written by: Helal Miah
Royal Dutch Shell was the winner of the oil companies that reported last week, making it a suitable candidate for share of the week.

After a disappointing first half 2016, the latest Q3 results were encouraging as the company reported a 25% increase in production compared to the same period last year. Most of the positive news came from the group’s focus on lowering costs and reducing capital expenditure. Investors should appreciate that earnings excluding identified items were up 18% to $2.7bn.

In recent years the company has been going through some major capital investment programmes, which should lead to cost efficiencies, increased production capacity and higher cash flows. However, the lower oil price environment has led the company to reign back on major investment programs. There have been huge asset write-downs and interested investors should note that the company is considering job cuts. However, while the company’s upstream business is suffering from lower oil prices, downstream parts of the business such as refining are doing better and helping to mitigate the earnings fall.

We would recommend Royal Dutch Shell as a ‘buy’ for the contrarian investor looking to benefit from a longer term recovery in the oil price. The income is attractive, but investors should be aware that there is a possibility of the dividends being cut if oil prices pull back down. We therefore view that the riskiness of the business has gone up to a medium level. Investors would be best advised to drip feed into the stock in the current climate. It’s also worth noting that UK investors should buy the -B- shares as they are not liable to Dutch tax.

Helal Miah is investment research analyst at The Share Centre

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Could you save money with a social broadband tariff?

Two-thirds of low-income households are unaware they could be saving on broadband, according to Uswitch.

How to help others and donate to food banks this winter

This winter is expected to be the most challenging yet for the food bank network as soaring costs push more pe...

Your rights for refunds if travel is affected by strikes

There have been a wave of strikes this year across many different industries, and more are planned over Christ...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week