Shell shares tipped as 2015 ISA addition
Tipsters at The Motley Fool have included Royal Dutch Shell (LSE: RDSB)(NYSE: RDS-B.US) in a list of three shares for growth and income proposed as worth looking at for ISA investors making additions to their portfolio as part of their 2015 allowance. Shell’s share price has fallen by 8% over the last twelve months, and is only 16% up on its level of five years ago, when the FTSE was in the doldrums. A number of analysts have forecast that these current levels could well be around the bottom of the present downwards cycle with 2016 tipped to usher in a health rebound of up to 30%. In expectance of that proposed scenario investors could drip feed funds in Shell shares over 2015 in the hope of cashing in next year as prices recover. The current weak oil price means that this year the company’s Earnings per Share could slip, if analysts prove correct, by around 30%, leading to a buying opportunity.
Exactly what the bottom is will of course be tricky to predict, which is why the drip feed technique is generally recommended. This means buying shares each month over a period of time to spread the risk of either paying more than necessary or not having invested the optimal amount when the tide begins to turn.
Leaving the growth potential seen in Shell’s share price aside, the dividend yields are currently extremely healthy, forecast to be around 5.6% in 2016. In the scenario that a full investment ISA were to be filled with an allocation of Shell shares, which wouldn’t be recommended, the cash return would be £843 in dividends in 2016, compared to £240 in interest for the same sum in the most attractive cash ISA.
On the flip side, another Motley Fool writer, Dave Sullivan, argues against the wisdom of investing in Shell shares at present. His view is that banking on oil prices rising again significantly in the next year is just too much of a risk and any evaluation should be made on the current price. His stance would be to wait on clearer picture on an oil price recovery before taking a risk with oil and energy companies. On a more positive note, with Shell not having cut its dividend since the Second World War however, Sullivan believes that this is unlikely to happen now and a 6% plus dividend yield is the most likely outcome for Shell investors.
As of 10:14 GMT, Wednesday, 11 March, Royal Dutch Shell Plc ‘A’ share price is 1,938.50p.