Jefferies remains bullish Royal Dutch Shell (LON:RDSA), pointing to the oil major’s dividend yield. The analysts argue that the recent oil price rally has given shareholders more reason to cheer.
Shell’s share price closed marginally higher yesterday, climbing 0.22 percent to 2,229.90p, largely in line with gains in the broader London market, with the benchmark FTSE 100 index adding 27.77 points to end the session 0.38 percent higher at 7,313.51. The group’s shares have added just under a fifth to their value over the past year, but are down by nearly one percent in the year-to-date.
Jefferies reiterated its ‘buy’ recommendation on Shell yesterday, with a price target of 2,470p on the stock.
“We believe that Shell has the most resilient cashflow profile in the European integrated oil sector, yet the stock’s dividend yield remains the highest in the peer group,” the broker’s analyst Jason Gammel commented, as quoted by Citywire. “We expect that the recent rally in oil prices – even if not fully sustained – should give the market further confidence in Shell’s cash cycle and lead to further yield compression.”
The analyst further pointed out that flexible capital spending would mean that the Anglo-Dutch oil major “would be able to fund the full dividends with free cashflow at about $50 a barrel in 2018”.
The upbeat comments came after Shell recently signalled plans to expand marketing operations in Asia, with the group targeting 20 percent of sales from its fuel stations worldwide to come from recharging electric vehicles and low carbon fuels by 2025, as the world shifts away from crude.
Barclays reiterated its ‘overweight’ rating on Shell last week, with a price target of 2,750p on the shares. According to MarketBeat, the oil major currently has a consensus ‘buy’ rating and an average price target of 2,393.85p.