I have 100 shares in Royal Dutch Shell and have recently been given the opportunity to buy more.
What should I do?
And what is the difference between the firm’s A and B shares?
Slick move: But should investors be considering buying up Royal Dutch Shell shares at this time?
Paul Thomas, of Money Mail, replies: First you need to ask yourself why you’re investing. If you’re playing around with small sums for fun, you’re happy with how the shares have performed and you are prepared for losses, then investing a little more might be appealing.
But if you’re investing for something more serious, such as your retirement, you need to give it much more thought.
With that in mind, let’s look at how your investment has performed. In the past five years, Royal Dutch Shell’s share price has risen 15.1 per cent to 2,598p.
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But in those five years the value of its shares has swung wildly, dipping as low as 1,351p in January 2016. And remember, there is no guarantee Shell’s shares will continue to grow in the future.
One of the major attractions of Shell is that it pays a good level of income to shareholders. At the moment it is paying 5.7 pence for every £1 invested.
Much of Shell’s future success is tied to the price of oil, which plummeted to less than $30 (£22) a barrel in 2016 but has since recovered to nearly $70 (£50.80).
While this is important, you should make your decision on whether you think Shell is a good company, and not what you think will happen to the price of oil.
Russ Mould, of stock broker AJ Bell, says: ‘Basing your decision on the oil price is pointless — and dangerous.
‘Legions of experts pore over oil data to work out what the price will be and they still get it wrong. Instead, the key here is to focus on whether you think Shell can sustain long-term dividend payments.’
To determine this you must look at the firms profits, its revenues, if it has any debt and how much.
If you’re still stuck, you can find what brokers think of companies online. Find a summary of brokers’ opinions at brokerforecasts.com. Alternatively, seek advice from a stockbroker.
As to the class of shares, A shares are paid in euros and are subject to a 15 per cent dividend tax. Its B shares, on the other hand, are paid in sterling and not subject to tax, meaning they are more suitable for British investors.
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Send your questions to: Investment Clinic, Money Mail, Northcliffe House, London, W8 5TT.