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?
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.
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:
- 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.
- 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.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.