Shell - tinkered then untinkered now thinking of retinkering

[Fluke]

I first bought Shell back in 2011 to join my holding of bp in that sector which I’d been building since 2008 when I started on my HYP adventure. I topped up here and there first in modest amounts and then in larger quantities as capital became available and my HYP grew in size. I have not added any new money for some years and the portfolio now stands at 35 shares across 23 sectors and 11 industries. i don’t do much Terry-style rebalancing so it’s a bit lumpy. I’m not much of a tinkerer. So it was an unusual decision back in early 2020 to decide to sell my oil and gas shares, the price had been slipping, the news was all doom and gloom for the industry, i was still up overall on capital and of course I’d had all the dividends. It had been bothering me for about a year so it wasn’t an entirely rash decision. Anyway I sold and got out and as the price continued to slip I thought I’d done the right thing. Then about a month later the price had gone down such that the f/c yield for Shell was now up at about 9%, I couldn’t resist and bought back in, just Shell, a full holding. About a week later the oil price crashed and so did the share price.

I swore that if it ever made its way back up to my buy price (about 1720p) I’d get out and stay out. It’s currently 1795 and for some reason I’m wavering.

Where are you on oil and gas? buy, sell or hold?

[absolutezero]

Personally, I'm buying oil and natural resources companies. Oil, gas, miners, uranium.
Even if we do transition to green tech (har har) then oil is still going to be needed.
Have you seen how much fossil fuel is needed to make a solar cell or a wind turbine?

Then add in that I suspect a cold winter and a few blackouts/big gas bills etc will solve the green problem that is caused by the obsession with Net Zero.
The voters will make their feelings known and it will be consigned to the bin.
I'm just waiting for the penny to drop with HMG.

[Arborbridge]

Oil: they're not making it anymore, and we need it and will for the foreseeable future.



Arb.

[Dod101]

Simple. never sell Shell.Every company has its ups and downs but as absolute zero has said, we are going to need fossil fuels for a long time to come and in any case, do you really think that Shell is just going to sit and watch its business wither away? Of course not. They are big enough with more than enough resources to be planning their 'green' future. They are not a fossil fuels company anyway. They are basically in energy production. A big field.

I have held Shell since about 1992 and like Unilever it is most unlikely ever to be sold. It follows that I am not that bothered about where it goes in the next six months but I would imagine that its price is more likely to rise than fall in that time. Some shares I will not sell, Unilever, Shell, Legal and General and HSBC amongst them. Shell and the others are large companies on the world stage and have plenty of diversity within each business so that they can and probably will adapt to conditions and markets for a long time to come.

They are not like the tobaccos, basically one product companies and in a contracting industry.

Dod

[Fluke]

... do you really think that Shell is just going to sit and watch its business wither away? Of course not. They are big enough with more than enough resources to be planning their 'green' future. They are not a fossil fuels company anyway. They are basically in energy production. A big field.
Dod

Yes, a point not made by Terry Smith in answer to a question about the industry in March this year.

https://www.youtube.com/watch?v=BgXMRvsieSs

[Urbandreamer]

Where are you on oil and gas? buy, sell or hold?

Not sure if my opinion is relevent on the HYP board.

Sure I was a HYP investor when I first started buying RDSB. I was not a HYP investor when I was buying it in May & June last year. Nor recently in Jan when I sold.

For what it's worth I sold because I was convinced that the managment of oil and gas companies needed to manage the transition from oil to a low carbon business. Shell had, I thought, shown evidence that they were lacking in ideas or commitment.
Since then the managment has had a bit of an about face. I now regret selling.

Ignore my opinions though, as they do not relate to HYP policy.

There are questions that should be considered if talking about a HYP.

1) Is RDSB a serious contender for a HYP? The yield isn't that high. Would the yield be enough to add it to your HYP?
2) Should RDSB be ditched as it cut it's dividend? I thought that there was some suggestion that companies that cut their dividend had little place in a HYP.

[kempiejon]

There are questions that should be considered if talking about a HYP.

1) Is RDSB a serious contender for a HYP? The yield isn't that high. Would the yield be enough to add it to your HYP?
2) Should RDSB be ditched as it cut it's dividend? I thought that there was some suggestion that companies that cut their dividend had little place in a HYP.

Both BP & Shell have recently cut income and pre covid didn't have much by way of income growth - Shell was static for 5 or 6 years in local currency and BP squeezed and extra couple of cents in the same time.
In my HYP I avoid selling but I have made annual sales to move cash from unsheltered to sheltered - I hold both BP and Shell in an ISA and some BP from 2006 unsheltered. I'll likely sell unseheltered BP within a few tax years. It's a bit previous to think what I'd buy with the released cash but I have no rule about it buying the same share and likely as not I'd find better candidates.
I'm keeping my holdings.

[funduffer]

I am a 'hold' on Shell. The yield is not great after the 67% cut last year, so steady as she goes, but no top-ups from me.

I think Shell may do well in the coming months/next few years as energy prices are rising, so we may see dividends start to increase again.

Longer term, Shell do have to re-invent themselves for a greener future, which they will do, but how successfully remains to be seen.

Maybe you should hedge your bets - hold Shell, but also buy a green energy supplier as well (SSE, or Greencoat UK Wind for example, or one of the other renewable infrastructure companies).

I hold SSE, Greencoat UK Wind, NextEnergy Solar Fund, and GCP Infrastructure as well as Shell.

FD

[Dod101]

... do you really think that Shell is just going to sit and watch its business wither away? Of course not. They are big enough with more than enough resources to be planning their 'green' future. They are not a fossil fuels company anyway. They are basically in energy production. A big field.
Dod

Yes, a point not made by Terry Smith in answer to a question about the industry in March this year.

https://www.youtube.com/watch?v=BgXMRvsieSs

I think the other thing is that Shell having cut its dividend has probably got its finances looking rather healthier than they look in the Fundsmith slide.

And to answer funduffer, Shell increased its dividend again in the second quarter of this year, after the big cut in 2019.

Dod

[Fluke]

Then add in that I suspect a cold winter and a few blackouts/big gas bills etc will solve the green problem that is caused by the obsession with Net Zero.

and is in part what is behind the recent share price surge no doubt. But then there's the niggle that COP26 is just round the corner.

Maybe you should hedge your bets - hold Shell, but also buy a green energy supplier as well (SSE, or Greencoat UK Wind for example, or one of the other renewable infrastructure companies).

Yes good point, I do have a 2/3 holding of SSE

1) Is RDSB a serious contender for a HYP? The yield isn't that high. Would the yield be enough to add it to your HYP?

3.5% currently so possibly not if you were buying now, covered 3 times though.

https://www.sharecast.com/equity/Royal_Dutch_Shell_B

[88V8]

1) Is RDSB a serious contender for a HYP? The yield isn't that high. Would the yield be enough to add it to your HYP?
2) Should RDSB be ditched as it cut it's dividend? I thought that there was some suggestion that companies that cut their dividend had little place in a HYP.

1 - not today perhaps, but the yield is growing, and I would consider it if I did not already hold in size. We're not exactly overwhelmed with better candidates...
2 - ditch a cutter is indeed part of the mantra, but I would distinguish between a serial cutter such as Aviva, and a once-in-a-lifetime cutter such as Shell.

V8

[absolutezero]

But then there's the niggle that COP26 is just round the corner.

Ignore.

China, Russia, Saudi Arabia and Iran aren't turning up. 4/10 of the biggest 'offenders'.

Stunted economic growth and the realities of going green will trump any pie in the sky Net Zero nonsense.

[Arborbridge]

2) Should RDSB be ditched as it cut it's dividend? I thought that there was some suggestion that companies that cut their dividend had little place in a HYP.

You're not hyping at present so perhaps you are rusty on the guidelines Companies which cut their dividends are not, and never have been, automatically sold from a HYP. THey would not be candidates for adding to, however.
Companies in which the dividend is cancelled when there is no chance of it being resumed in the medium term - that's a different matter. Each would be considered in its merits, but cancellation could result in selling - even then it only reluctantly sanctioned by Pyad in his original writings.


Arb.

[csearle]

2) Should RDSB be ditched as it cut it's dividend? I thought that there was some suggestion that companies that cut their dividend had little place in a HYP.

You're not hyping at present so perhaps you are rusty on the guidelines Companies which cut their dividends are not, and never have been, automatically sold from a HYP. THey would not be candidates for adding to, however.
Companies in which the dividend is cancelled when there is no chance of it being resumed in the medium term - that's a different matter. Each would be considered in its merits, but cancellation could result in selling - even then it only reluctantly sanctioned by Pyad in his original writings.

That too is my understanding. C.

[Urbandreamer]

2) Should RDSB be ditched as it cut it's dividend? I thought that there was some suggestion that companies that cut their dividend had little place in a HYP.

You're not hyping at present so perhaps you are rusty on the guidelines Companies which cut their dividends are not, and never have been, automatically sold from a HYP. THey would not be candidates for adding to, however.
Companies in which the dividend is cancelled when there is no chance of it being resumed in the medium term - that's a different matter. Each would be considered in its merits, but cancellation could result in selling - even then it only reluctantly sanctioned by Pyad in his original writings.
Arb.

Thanks for the correction, though you may note that I was asking questions rather than pontificating.

For those actually interested in Shell as a company, rather than in simple yield terms; I too agree that the dividend cut may have been a good thing for the company. That was one reason that I used the drop in price after the fact to buy more.

However are such things supposed to be done by those who do HYP? Arb argues not, and that is my rusty understanding too.

What is the general feeling about companies that have cut?

At what point have they rehabilitated themselves and become a HYP option to be added to and should those who don't hold consider it with equal favour?

There are some of the reasons that I no longer HYP, but I'm not trying to argue that others should not follow the guidelines.

Simply that if you do, then you should regard the HYP guidelines as your starting point when considering a holding. Not the sector that it trades in. I thought that the HYP guidelines had an opinion that you should not limit yourself to a few sectors.

Were I actually trying to argue a case, then that surely is the HYP argument. Not the prospects for the sector.

As I said, I no longer HYP. As such I question if I should have made my original response and I certainly shouldn't be venturing an opinion as to the validity of Shell as a HYP component.

[Arborbridge]

Thanks for the correction, though you may note that I was asking questions rather than pontificating.

For those actually interested in Shell as a company, rather than in simple yield terms; I too agree that the dividend cut may have been a good thing for the company. That was one reason that I used the drop in price after the fact to buy more.

However are such things supposed to be done by those who do HYP? Arb argues not, and that is my rusty understanding too.

What is the general feeling about companies that have cut?

At what point have they rehabilitated themselves and become a HYP option to be added to and should those who don't hold consider it with equal favour?

Well, to answer a straight question - I think in the original version of HYP, as regards topping up a "cutter" the answer I received from Pyad was just go through the normal criteria, including the 5 year history of stable or rising dividends. This was the line taken by Luni too: 5 years before being admitted to the topup list. I've always regarded that as too much: but I am impatient to a fault.

However, Pyad would be the first to say, life cannot always be that rigid (oddly, some might think) and that it's up to you what you do within limits. Some argue that a cut dividend with a restored ability to pay is a good prospect, provided that yield is acceptable, and I think many would agree with that.

Another great investor, Jim Slater, would give a guideline of a good history for at least two years, plus a good forecast two years out as being a requirement. When queried on the reliability of forecasts, his belief was that a concensus forecast is better than total ignorance, with the phrase "You can fly blind if you like, but I prefer not to".

Arb.

[Dod101]

My attitude to HYPing is much the same as Urbandreamer and I must say that my comments on Shell were based not on their suitability as a HYP share but in direct response to his question because it seems to me that that is the sort of question(s) which any investor should be asking him/herself. These are fundamental issues long before anyone decides whether the share fulfills the criteria for a HYP share.

Dod

[Arborbridge]

My attitude to HYPing is much the same as Urbandreamer and I must say that my comments on Shell were based not on their suitability as a HYP share but in direct response to his question because it seems to me that that is the sort of question(s) which any investor should be asking him/herself. These are fundamental issues long before anyone decides whether the share fulfills the criteria for a HYP share.

Dod

These are fundamental issues long before anyone decides whether the share fulfills the criteria for a HYP share.

Yes and no

One should look at the HYP criteria first which reduces the pool of shares considerably, and then look in further detail - which would include the other factors you are concerned with.
To put the "other factors" first means wasting time examining a load of non-HYP shares.

Sorry to be pendantic, but it does seem your remark puts the cart before the horse, as regards procedure.

Arb.

[Dod101]

My attitude to HYPing is much the same as Urbandreamer and I must say that my comments on Shell were based not on their suitability as a HYP share but in direct response to his question because it seems to me that that is the sort of question(s) which any investor should be asking him/herself. These are fundamental issues long before anyone decides whether the share fulfills the criteria for a HYP share.

Dod

These are fundamental issues long before anyone decides whether the share fulfills the criteria for a HYP share.

Yes and no

One should look at the HYP criteria first which reduces the pool of shares considerably, and then look in further detail - which would include the other factors you are concerned with.
To put the "other factors" first means wasting time examining a load of non-HYP shares.

Sorry to be pendantic, but it does seem your remark puts the cart before the horse, as regards procedure.

Arb.

You are speaking as a true HYPer. I am not. That is the difference. I tend to start with the business sector, then the companies within it, but if I carry on I will be well off topic which is after all discussing Shell and its prospects. I made my views clear much further up this thread so cannot really say much more.

Dod

[tjh290633]

Thanks for the correction, though you may note that I was asking questions rather than pontificating.

For those actually interested in Shell as a company, rather than in simple yield terms; I too agree that the dividend cut may have been a good thing for the company. That was one reason that I used the drop in price after the fact to buy more.

However are such things supposed to be done by those who do HYP? Arb argues not, and that is my rusty understanding too.

What is the general feeling about companies that have cut?

At what point have they rehabilitated themselves and become a HYP option to be added to and should those who don't hold consider it with equal favour?

There are some of the reasons that I no longer HYP, but I'm not trying to argue that others should not follow the guidelines.

Simply that if you do, then you should regard the HYP guidelines as your starting point when considering a holding. Not the sector that it trades in. I thought that the HYP guidelines had an opinion that you should not limit yourself to a few sectors.

Were I actually trying to argue a case, then that surely is the HYP argument. Not the prospects for the sector.

As I said, I no longer HYP. As such I question if I should have made my original response and I certainly shouldn't be venturing an opinion as to the validity of Shell as a HYP component.

This stirred me to look at my own records. I see that I topped up RDSB in March 2020 at £17.35, a couple of months before they announced the dividend cut, and again in July 2020 at £12.11, a few days after the reduced dividend had been received. In both cases they were the most eligible share in my own top-up table and I viewed the reduction as a prudent move at that stage in the pandemic. They have started to raise the dividend again, from 16cents (a reduction of 66% from the previous level), to 16.65cents, 17.35cents and 24cents, increases of 4.06%, 4.2% and 38.3% respectively. The latest price is £17.90, so both top-ups are now above the waterline.

I have just updated some of my figures, and here are the yearly figures for the dividends received in GBp terms:

Year to      Divs      Yield   Increase
13-Jun-07      68.54   3.77%           
11-Jun-08      73.31   4.03%      6.96%
10-Jun-09     101.37   4.85%     38.28%
09-Jun-10     104.97   5.18%      3.55%
27-Jun-11     105.14   4.51%      0.16%
21-Jun-12     107.54   4.92%      2.28%
27-Jun-13     111.72   5.04%      3.89%
26-Jun-14     111.09   4.37%     -0.56%
22-Jun-15    121.20    5.86%      9.10%
27-Jun-16    127.75    7.40%      5.40%
26-Jun-17    148.19    7.19%     16.00%
18-Jun-18    140.39    5.54%     -5.26%
24-Jun-19    146.18    5.88%      4.12%
22-Jun-20    122.82    9.66%    -15.98%
21-Jun-21     48.79    3.65%    -60.28%

Some of the changes are down to exchange rate variations, but the general picture is clear. My view about a company that prudently reduces its dividend, but continues to raise it thereafter, is that it qualifies for top-up if the yield is still acceptable at the current price. This table covers the period since my first purchase of RDSB, in June 2006 at £18.20. They were bought when I decided to sell BG Group, because of low yield. Ironic that RDSB has since absorbed BG. or should I say "assimilated, resistance is futile".

TJH