There is much to be said for buying the biggest and the best in a sector like ExxonMobil (NYSE: XOM), the world’s biggest oil and natural gas company.
There are also many reasons to buy the second biggest in a sector, especially when it is a Big Oil firm like Royal Dutch Shell (NYSE: RDS-A). Not as huge as ExxonMobil, Royal Dutch Shell is just as good. It is also selling near its 52-week low.
For long term investors, that is a very appealing buying opportunity!
Royal Dutch Shell is off for the last week, month, quarter, and six months of market action (chart below). For 2014, the stock price has fallen by nearly one percent. As a result of this decline, Royal Dutch Shell is less than twenty percent above its low for the last 52 weeks of trading.
But there is much about Royal Dutch Shell that should have long term investors bullish despite the bearish trajectory.
The major reason is that global growth will increase the demand for oil and natural gas. Coal is too dirty. Alternative energy is nowhere near ready to be used for mass market needs. From that, the need for natural gas and oil will rise around the world, especially in China and India.
Royal Dutch Shell pays shareholders royally to wait for the stock price to rise.
At present, the average dividend yield for a member of the Standard & Poor’s 500 Index (NYSE: SPY) is around 2 percent. The dividend yield for ExxonMobil is just over 3 percent. Royal Dutch Shell has a dividend yield of more than 4.7 percent. The company also has a history of increasing the amount of the dividend. That means that income investors owning stock in Royal Dutch Shell get a raise simply for not selling their shares!
With the bullish outlook for Big Oil, that makes for a rewarding total return for long term investors in Royal Dutch Shell!