LONDON — Royal Dutch Shell plc (ADR) (NYSE:RDS.B) is the bluest of blue-chip shares. The company employs 90,000 people worldwide. It is a true global titan with over a century of history.
Today, Shell trades at the kind of valuation that one might expect from a weaker company with worse prospects. Yet, the oil giant looks as strong as ever.
Royal Dutch Shell plc (ADR) (NYSE:RDS.B)’s dividend is a thing of beauty. Year in, year out, Shell keeps paying up. In dollar terms, the dividend has not been cut since the second World War. Not only is the yield high, the cash payout is enormous. In 2011, Royal Dutch Shell plc (ADR) (NYSE:RDS.B) paid out more cash in dividends than any other U.K. company. It is expected to do the same again this year.
The average FTSE 100 share is forecast to yield 3.2%. This year, the market is expecting Shell to pay $1.84 in dividends. That equates to a forecast yield of 5.4%. Analysts expect Shell’s dividend to increase 4.3% in 2014.
Only a handful of shares could likely yield more in 2013.
Today, Royal Dutch Shell plc (ADR) (NYSE:RDS.B) trades on just nine times last year’s earnings per share. With 8.4% of earnings growth forecast for 2013, the P/E for this year is 8.3 times expected earnings.
The average FTSE 100 company trades on a historic P/E of 16.7. Average forecast earnings growth is slightly higher among other FTSE 100 constituents, at 9.5%. While Shell is cheaper than nearly all FTSE 100 companies, it is expected to grow more slowly than most.
This perception could be a result of recent falls in the price of crude oil. In the last three months, crude prices have fallen by around 9%. In that time, shares in Royal Dutch Shell plc (ADR) (NYSE:RDS.B) are off by 3%. While the price of oil will affect Shell’s earnings, it has historically had little correlation with the company’s share price.
The article Is Royal Dutch Shell the Cheapest Share in the FTSE 100? originally appeared on Fool.com and is written by David O’Hara.
David O’Hara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
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