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It’s boring, but Shell’s fat yield will reward patience

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Screen Shot 2016-08-29 at 22.18.50There are clear risks: history suggests the Opec deal to cut oil production and support prices won’t stick; the company still has to prove it can make its huge BG acquisition work; and the dividend is not covered by earnings for this year and barely covered for next.

4 OCTOBER 2016 • 8:28AM

Royal Dutch Shell

This tip won’t win many prizes for originality but patient, longterm income seekers may find it hard to overlook the prospect of a soundly financed company that offers a 7pc dividend yield while interest rates and yields on the safest bonds remain at rock bottom.

There are clear risks: history suggests the Opec deal to cut oil production and support prices won’t stick; the company still has to prove it can make its huge BG acquisition work; and the dividend is not covered by earnings for this year and barely covered for next.

Shell’s yield at least helps to compensate for these dangers and the company hasn’t cut its dividend since 1945. Any decision on the payout will not be taken lightly and the higher the price of crude goes the safer the dividend looks.

Oil stocks are generally unloved but the fat yield means investors are being “paid to wait” for a turn in sentiment.

Questor says: hold
Ticker: RDSB

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