As I’m sure you’ll all know, oil prices took a nosedive in April 2020 as the price per barrel went into negative figures (analysts still aren’t able to give an explanation as to why that happened). Nevertheless, the demand for oil plunged as the lockdown forced many to work from home which limited a lot of people from traveling. Alongside that, we also had the price war earlier last year too. Shell’s share price is currently sitting at £12.59.
Royal dutch shell stock price history
The oil and gas giant, unfortunately, had to cut its dividend which it hasn’t done since World War II. Given everything that happened, however, we’ve clearly seen a rebound since the price spiked over 40% in the past couple of months. Vaccines have been rolled out across the country and there is clearly a future for the demand for Shell’s services.
There’s no doubt in my mind that when Shell does eventually increase its earnings in the coming years, the dividend will be restored, although it may take some time. Shell executives have a solid plan to reduce their debt to $65bn down from the current $73bn+ and once that’s happened we can be sure that the veins of Shell will run freely with newly injected cashflow.
Hopefully it uses the money responsibility because as we’ve seen from the PM’s message, Green energy is the future and unfortunately for the shareholders, renewable and green energy projects don’t yield as much profit as oil and gas do. The transition will be difficult but there is a tremendous upside awaiting those who purchase this stock now, ahead of the future.
One of Buffet’s favourites
My second stock pick for the start of 2021 is £114bn Unilever. This is a company that’s special enough to warrant Warren Buffet making an offer to purchase it himself, albeit along with equity firm 3G and Kraft Heinz. If Buffet is involved you can bet that it signifies the company possesses the ‘economic moat’ that he looks for. The behemoth of a company fits the requirements that Berkshire Hathaway looks for in its investments. It’s simple to understand and a large business with a solid consumer base of well-known products that span back for decades.
Be greedy when others are fearful
Whilst the FTSE 100 fell by 12% over the entire of 2020, Unilever is actually 2% up. Over the past 10 years, Unilever has returned 125% to investors and that’s without the dividend. Meanwhile the FTSE index trails behind with a pretty appalling 10% increase over the same period. The current share price for Unilever PLC is around £44.61.
Although current dividend levels look good enough at 3.3%, it’s very likely we’ll see an increase in this in the next couple of years. There’s no doubt they have sound fundamentals and a solid management team in place.
Unilever is no stranger to Mergers and Acquisitions and as it moves its legal team to London, analysts report that it should make for a smoother process going forward. Unilever is a stock to buy and hold for sure. To top it all off, Unilever’s highest price was back in August 2019 and we’re currently still 15% down from its all-time high.