Royal Dutch Shell (RDS.A), which is held by Scott Black and Tweedy Browne, is a wonderful asset for any long term portfolio looking for a high and sustainable cash dividend yield and future growth potential. Since 2005, Shell has been investing heavily in order to grow its oil and gas production and increase its downstream and upstream margins. In addition, after disappointing quarterly results, the company sells at a great discount to its big oil peers. Maybe now its the time to start looking at this great cash flow generator.
Quarterly Results and the Future Ahead
Shell’s earnings were indeed very poor. At $4.5 billion or $1.42 per ADS, they were 15% below consensus estimates. Earnings were down by 32% year-over-year and 2% sequentially. Poor results could be explained mainly by higher exploration and operating expenses, production disruptions in Nigeria, and weak refining results. That said, the company is firmly investing to boost its future production capabilities. The company has $149 billion of capital tied up in new projects which are expected to generate operating cash flow of over $170 billion if Brent crude trades above $80.
— Guru Focus