Dividend of the week - Royal Dutch Shell

DividendMax Ltd.

Dividend of the week - Royal Dutch Shell

The week beginning the 29th of July has fifty five companies that are covered by DividendMax reporting and declaring dividends on the London Stock Exchange. We are going to have a look at them and find some good dividend plays. We will look at the companies reporting that appear in the top thirty of the Optimiser and then move on from there. In order to make selection easier we choose a yield of over 4%. On Monday we have Reckitt Benckiser and Hammerson. On Tuesday we have BP, Informa and Tullet Prebon. On Wednesday we have British American Tobacco & Centrica. On Thursday we have Astra Zeneca, Royal Dutch Shell, BAE systems, Intu properties, UBM and RPS Group and finally on Friday we have Rexam, Man Group  and Inmarsat.

Centrica, BP, RPS Group and MAN have already been dividend of the week. It is our intention to revisit Man Group after the dividend policy becomes clear following the results on Friday 2nd August.

We will eliminate Tullet Prebon and Astra Zeneca at this stage due to falling earnings.

So our long list is Reckitt, Hammerson, Informa, BAT, Royal Dutch Shell, Intu, UBM, Rexam and Inmarsat.

Reckitt Benckiser are on a PE of 17.4 with low EPS growth expected. Hammerson are expected to show a big rise in earnings but dividend cover is so low that only a small dividend increase can be expected. Informa are operating in tough markets right now. BAT look very expensive when compared to Imperial. Intu have a barely covered dividend. Revenues and profits at Inmarsat are expected to fall with dividend cover falling to uncomfortable levels. Royal Dutch Shell, Rexam and UBM look interesting. Lets have a look at the fundamentals of each:

Company                           Price Earnings Ratio           Dividend Cover           Annualised Yield

Royal Dutch Shell                             8.4x                             2.4x                                 6.69%

Rexam                                            12.6x                            2.3x                                 4.34%

UBM                                               12.5x                             2.0x                                 4.83%

Whilst Rexam and UBM do not look particularly expensive on fundamentals, Royal Dutch Shell look cheap and are our Dividend of the week. Buy the 'B' Shares which currently stand at a small discount to the 'A' shares. The 'A' shares are subject to Dutch withholding tax and should theoretically trade a discount to the 'B' shares. However the companies share buyback scheme has tended to focus on the 'A' shares causing them to trade at a premium.

Companies mentioned

This article was originally acceessible only to DividendMax members and is now publicly available.