About a year back, I was perfectly happy with my investment in Royal Dutch Shell. I had absolutely no intention to sell and was rather planning to gradually build the position in ROTH IRA of my wife via dividend investment.
To my and surprise of many, Shell decided to cancel its Scrip Dividend Program with effect from 2Q14 interim dividend onwards (the company has now reinstated, but I would talk about it later). The scrapping brought some serious headaches for many shareholders, including me. I invested in Shell simply because its tax residence was in the Netherlands though is incorporated in the United Kingdom and this was the reason why it was able to make increasing payouts among dividend growth investing practitioners. At the time the scrip program was canceled, I decided to evaluate whether I still want Shell in my portfolio and I found that the company was quite overvalued to say the least. IT WAS TIME FOR SHELL TO GO!
I decided to sell my stake in Royal Dutch Shell in three installments – in May 2014 at $78.68, in June 2014 at $78.99 and in July 2014 at 82.60. Much to my happiness after I saw Shell priced at $59.13 at Wednesday’s market close.
Who knew that per-barrel price of crude oil would fell from nearly $115 to just ahead of $46? Royal Dutch Shell now trades only 3-4 percent higher than its multi-year low of $56.82. I am a happy man because if Shell had not canceled its Scrip Dividend Program, I would have never left Shell in the first place.
Coming to the company reinstating the program now, you may be wondering like many whether to buy back into Shell? There is no doubt that Royal Dutch Shell is attractively valued these days. Admirers of Shell have their hopes on new CEO Ben van Beurden but I would prefer the services industry for some time and not Big Oil.