Is Royal Dutch Shell plc (NYSE:RDS.B) A Great Dividend Stock?

Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. In the past 10 years Royal Dutch Shell plc (NYSE:RDS.B) has returned an average of 6.00% per year to investors in the form of dividend payouts. Does Royal Dutch Shell tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. See our latest analysis for Royal Dutch Shell

5 questions to ask before buying a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

  • Does it pay an annual yield higher than 75% of dividend payers?
  • Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
  • Has the amount of dividend per share grown over the past?
  • Can it afford to pay the current rate of dividends from its earnings?
  • Will it have the ability to keep paying its dividends going forward?

NYSE:RDS.B Historical Dividend Yield Apr 26th 18
NYSE:RDS.B Historical Dividend Yield Apr 26th 18

How does Royal Dutch Shell fare?

Royal Dutch Shell has a trailing twelve-month payout ratio of 119.13%, meaning the dividend is not sufficiently covered by its earnings. In the near future, analysts are predicting a more sensible payout ratio of 72.54%, leading to a dividend yield of around 5.28%. Furthermore, EPS should increase to $2.43, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Although RDS.B’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Investors have seen reductions in the dividend per share in the past, although, it has picked up again. In terms of its peers, Royal Dutch Shell produces a yield of 5.17%, which is high for Oil and Gas stocks.

Next Steps:

With these dividend metrics in mind, I definitely rank Royal Dutch Shell as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three pertinent aspects you should further examine:

  1. Future Outlook: What are well-informed industry analysts predicting for RDS.B’s future growth? Take a look at our free research report of analyst consensus for RDS.B’s outlook.
  2. Valuation: What is RDS.B worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether RDS.B is currently mispriced by the market.
  3. Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.