Stocks ticked higher this morning as investors processed the moves of the week. The major indices were looking to close the week higher ahead of the holiday weekend. Markets will be closed on Monday in observance of Juneteenth.
Today we’ll highlight a mega-cap company that’s looking to move higher in the second half on increasing demand and recently outlined its plan to pass those earnings along to shareholders. This company’s stock currnetly seems undervalued, but it may not be for long.
Shell PLC (SHEL)
British oil major Shell recently announced plans to boost returns to shareholders and keep oil output steady. The company said it would increase shareholder distributions to 30% to 40% of cash flow from operations, up from 20% to 30% previously. This includes raising the dividend per share by 15% and executing at least $5 billion of share buybacks in the year’s second half.
“Performance, discipline, and simplification will be our guiding principles as we allocate capital to enhance shareholder distributions while enabling the energy transition,” said Shell’s CEO Wael Sawan, who took office at the start of the year after serving as director of the company’s integrated gas, renewables, and energy solutions. “We will invest in the models that work – those with the highest returns that play to our strengths,” he continued.
SHEL investors enjoy a dividend yield north of 4%. And the predicted payouts over the next couple of years are well covered by historic record earnings. So the near-term income prospects appear rock solid. In terms of valuation, the stock has a price-earnings ratio of 5.10, a price-sales ratio of 0.57, and an enterprise-value-to-sales ratio of 0.66. These numbers imply that Shell may be undervalued. The current consensus among 30 polled investment analysts is to buy stock in Shell. A median 12-month price target of $73.60 estimate represents a 22% increase from its current price.
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