Shell Has the Best Dividend Yield and Lower Valuation



Shell’s dividend yield

Royal Dutch Shell’s (RDS.A) dividend yield is higher than ExxonMobil’s, Chevron’s, BP’s (BP), Total’s (TOT), and Suncor’s. Shell has the second-highest market cap among the six companies, of $257 billion, and the best dividend yield, of 6.0%.

The stock’s yield has risen from 5.3% in Q2 2018 due to its price falling 9%. Most of that fall came in the fourth quarter of 2018. Contrarily, in the current quarter, Shell is the only stock to have risen, by ~1%.

In the second quarter, Shell is set to pay a steady dividend of $0.94 per share (or ADR) and execute a $25 billion share buyback program to increase shareholder returns. In the latest tranche of the program, the company is set to repurchase $2.75 billion in stock by July 29.

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Shell’s forward PE multiple of 10.5x is below peers’ average of 12.4x. BP’s and Total’s forward PE multiples are also lower, at 11.1x and 9.2x, respectively. Shell’s forward EV[1.enterprise value]-to-EBITDA multiple of 5.0x is also below peers’ average of 5.4x. Shell’s higher valuation is due to its strengthening financials, robust upstream portfolio, and expected earnings growth.

Shell’s strong upstream project pipeline is expected to grow production, and the company’s financials strengthened in Q1 2019. Shell’s total debt-to-total capital ratio was below the industry average in the quarter, pointing at a favorable scenario, and the company had sufficient cash reserves. To learn more, read Shell: Stronger in Q1 Due to Its Strategy.

Whereas analysts expect Shell’s earnings to rise 10% this year and Total’s (TOT) to rise 7%, they expect BP’s earnings to fall 8%. Overall, Shell’s dividend yield, lower valuation, and higher earnings growth look attractive.


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