Shell

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Simpo Two

Original Poster:

85,495 posts

266 months

Tuesday 29th March 2016
quotequote all
Much to my surprise my RDS shares have managed 7.6% dividend net. I know very little about shares and sharedealing but how reliable are dividends? The oil industry has taken a hit which is reflected in the share price, but I was surprised about the dividend. If they can pay 7% in hard times maybe I should buy some more... or will it fall to zero the day after I invest?

gibbon

2,182 posts

208 months

Tuesday 29th March 2016
quotequote all
Same as the BP shares i hold, they are just on 8% i think.

The reason for the high yield (normally 4-5% i think is as they are maintaining dividend payments despite the depressed price, partly as a statement to the market i think, hence the yield is increased. I know Shells position less well, but i imagine similar to BP in that they have huge cash reserves and i think at depressed level make great long term holds with great dividend payments.

I also like to think my quarterly divs pay for my petrol / a driving holiday etc so great to own a bit of a company you actually use.

greygoose

8,266 posts

196 months

Tuesday 29th March 2016
quotequote all
Shell have never dropped their dividend I believe so are a good share if you want income, particularly at the current share price.

Simpo Two

Original Poster:

85,495 posts

266 months

Tuesday 29th March 2016
quotequote all
Thanks folks, I appreciate your input.

So why don't people put all their money into the likes of BP and Shell rather than fanny about with 'funds' that support a whole Christmas Tree of middlemen and go up and down like a tart's knickers? 'But it's a long term investment sir...'

sidicks

25,218 posts

222 months

Tuesday 29th March 2016
quotequote all
Simpo Two said:
Thanks folks, I appreciate your input.

So why don't people put all their money into the likes of BP and Shell rather than fanny about with 'funds' that support a whole Christmas Tree of middlemen and go up and down like a tart's knickers? 'But it's a long term investment sir...'
Between August 2014 and January 2016, the share price dropped almost 45%. That puts your 8% dividend into perspective...!

Simpo Two

Original Poster:

85,495 posts

266 months

Tuesday 29th March 2016
quotequote all
sidicks said:
Between August 2014 and January 2016, the share price dropped almost 45%. That puts your 8% dividend into perspective...!
Interesting - so as share price goes down, dividend goes up pro rata...?

So if the share price were to double, would the dividend halve or would it double too?

sidicks

25,218 posts

222 months

Tuesday 29th March 2016
quotequote all
Simpo Two said:
Interesting - so as share price goes down, dividend goes up pro rata...?

So if the share price were to double, would the dividend halve or would it double too?
Dividend rate = dividends / share price.

So if the share price halves, the dividend rate doubles, but you get the same cash amount.

The share price for Shell in August 2014 was around 2,550p
The share price for Shell in January 2016 was around 1,350p

(I'm deliberately cherry picking the recent extremes to exaggerate the effect).

If the dividends paid out were 108p per share, then:
Dividend yield as at August 2014 = 108/2550 = 4.2%
Dividend yield as at January 2016 = 108/1350 = 8.0%

Simpo Two

Original Poster:

85,495 posts

266 months

Tuesday 29th March 2016
quotequote all
This is good. So, invest while share price is low to get good divdend returns, then if/when share price recovers to former level, bail out and take gain whilst exiting...

If I'd started this game at 21 I'd be quite rich by now!

Frankthered

1,624 posts

181 months

Monday 4th April 2016
quotequote all
gibbon said:
Same as the BP shares i hold, they are just on 8% i think.

The reason for the high yield (normally 4-5% i think is as they are maintaining dividend payments despite the depressed price, partly as a statement to the market i think, hence the yield is increased. I know Shells position less well, but i imagine similar to BP in that they have huge cash reserves and i think at depressed level make great long term holds with great dividend payments.

I also like to think my quarterly divs pay for my petrol / a driving holiday etc so great to own a bit of a company you actually use.
Actually BP has been borrowing money to maintain the dividend.

hidetheelephants

24,448 posts

194 months

Monday 4th April 2016
quotequote all
Frankthered said:
gibbon said:
Same as the BP shares i hold, they are just on 8% i think.

The reason for the high yield (normally 4-5% i think is as they are maintaining dividend payments despite the depressed price, partly as a statement to the market i think, hence the yield is increased. I know Shells position less well, but i imagine similar to BP in that they have huge cash reserves and i think at depressed level make great long term holds with great dividend payments.

I also like to think my quarterly divs pay for my petrol / a driving holiday etc so great to own a bit of a company you actually use.
Actually BP has been borrowing money to maintain the dividend.
Trebles all round in the boardroom then! wobble

Ozzie Osmond

21,189 posts

247 months

Monday 4th April 2016
quotequote all
Frankthered said:
Actually BP has been borrowing money to maintain the dividend.
Yes, the Jeremy Corbyn/John McDonnell model...

IMO if there's no significant recovery in oil price the sector will eventually have to reduce dividends because it very clearly can't reduce costs sufficiently to make up the gap. The question is simply which company will crack and do it first - the rest will then surely follow.

marky1

1,047 posts

197 months

Monday 4th April 2016
quotequote all
Simpo Two said:
Interesting - so as share price goes down, dividend goes up pro rata...?

So if the share price were to double, would the dividend halve or would it double too?
Remember the dividend can be cut though! Shell is yielding 8% or whatever it is, because there is a market expectation the dividend amount will be cut. I.e if they cut it in half the yield would be back down to 4%.

jshell

11,023 posts

206 months

Tuesday 5th April 2016
quotequote all
Shell have firm targets for divi's to reward investors. It's been pretty steady for many, many years. If you're after steady income, Shell is pretty hard to beat.

Simpo Two

Original Poster:

85,495 posts

266 months

Tuesday 5th April 2016
quotequote all
jshell said:
Shell have firm targets for divi's to reward investors. It's been pretty steady for many, many years. If you're after steady income, Shell is pretty hard to beat.
Amazing that nobody recommended it to me isn't it.

jshell

11,023 posts

206 months

Tuesday 5th April 2016
quotequote all
Simpo Two said:
jshell said:
Shell have firm targets for divi's to reward investors. It's been pretty steady for many, many years. If you're after steady income, Shell is pretty hard to beat.
Amazing that nobody recommended it to me isn't it.
yes

Simpo Two

Original Poster:

85,495 posts

266 months

Tuesday 5th April 2016
quotequote all
OK. My current shares are through Equiniti (who I presume run Shareview); should I stay with them for simplicity or would I get a better deal somewhere else?

Storer

5,024 posts

216 months

Tuesday 5th April 2016
quotequote all
The dividend should be looked at as interest, but on a capital sum that can rise or (more importantly) fall.

HMG are taking more interest in dividends too.

It is only worth doing the 'how much have I earned' calculation once you know the 'cash in' value and how much tax you have paid.

Obvious I know, but some forget when the dividend cheque arrives and leads them to think they are 'in the money'.

Simpo Two

Original Poster:

85,495 posts

266 months

Tuesday 5th April 2016
quotequote all
Oh yes, my numbers bod records it all. But if I'm not much mistaken I can have £5K in dividends tax free. So... at 7% that's £71K I can invest... spin

Storer

5,024 posts

216 months

Tuesday 5th April 2016
quotequote all
Interesting.

That £70k invested in the best E Type you could find two years ago would now see it worth £150k.

Oh, and no tax.

sidicks

25,218 posts

222 months

Tuesday 5th April 2016
quotequote all
Storer said:
Interesting.

That £70k invested in the best E Type you could find two years ago would now see it worth £150k.

Oh, and no tax.
£70k on Red 27 would see that £70k now worth £2,520,000.

It's easy to pick winners with the benefit of hindsight...!!

Edited by sidicks on Tuesday 5th April 22:05