Chevron A Safer Bet Than Shell
SeekingAlpha.com article published 13 April 2015
Chevron A Safer Bet Than Shell
Shell has lost a huge amount of money in its shale bets in North America to the tune of $900 million alone in 2014. As a result, Shell is cutting spending by 20% to lower its North American shale exposure to try and keep losses at a minimum.
Summary
- Shell’s shale bets has been disastrous in North America. The company lost $900 million alone in 2014 and continues to hemorrhage profits.
- Shell’s refining operations need to be restructured, as its current operations will likely affect profitability negatively over the next few years.
- Chevron has a lower debt-to-equity ratio than Shell. If oil drops to $30 a barrel, Chevron has more resources to keep rewarding shareholders vs. Shell.
Income investors are attracted to Royal Dutch Shell (NYSE:RDS.A) because of the very attractive yield of 6%+. Nevertheless, as income investors we need to do more fundamental work on our underlyings instead of just looking at dividend payouts. In my opinion, Shell’s yield is not backed up by the fundamentals presently. We don’t necessarily need huge capital gains in our underlyings (as we manage an income portfolio), but protecting the downside is always our priority.
Let’s take a look at Shell and I’ll explain why, in my opinion, there are better opportunities in the energy space — such as Chevron (NYSE:CVX) — at the moment, irrespective of the high yield Shell is currently paying out. To start, we have to look at Shell’s track record. Why? Because the company is promising a $15 billion all cash dividend in addition to the repurchase of $25 billion of stock between 2017 and 2020.
The TRUTH will set you FREE.
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