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Friday, 06/04/2004

Shelling Out Profits
By Nich Sheldon
SC - Shell Transport and Trading Plc

Company Description

Shell Oil Products US, a subsidiary of Shell Oil Company, is a leader in the refining, transportation and marketing of fuels, and has a network of nearly 7,500 branded gasoline stations in the Western United States. Shell Oil Company is a 50 percent owner of Motiva Enterprises LLC, along with Saudi Refining, Inc., which refines and markets branded products through 11,000 stations in the Eastern and Southern United States. Shell Oil Company is an affiliate of the Royal Dutch/Shell Group of Companies (NYSE: RD/SC). For more information, please visit www.shell.com .

[Source: Company Press Release]

Reasons to Invest:

Over the past 8-12 weeks oil prices have soared. I can't begin to express the amount of anger I feel when I go to fill up my tank at the gas station, only to find out that gas prices have gone up another five to ten cents. I am sure that the feeling is mutual even if you're not hurting for cash. The reality is that we have no control over the price of a gallon of gasoline as individuals, and that no matter what we try and do to drive less and less, or carpool more and more, we all need transportation to get from place to place.

Lately I have been reflecting on my teenage driving years. I can recall scraping change, flipping couch cushions upside down and going through mom's catchall drawer for pennies and nickels, just to get another gallon of gasoline (at that time it was well under $1 for a gallon). If I couldn't find any loose change I would just ask a friend or two of mine to pitch on gas money and sure enough I could come up with five bucks when I needed it. Five bucks used to be enough to buy more than five gallons, albeit it wasn't much since I drove a 71 Nova, but nonetheless it was enough to get to the mall or across town and back a few times over. Now five dollars at the pump is less than 3 gallons, and while I have a more gas efficient automobile I can't rely on friends to pitch on gas money as they all have their own cars to fill up, and budgets to balance.

Six or seven years ago I would have laughed at someone if they told me that I would have to pay a dollar to travel 5 to 7 miles in my car. Guess who's laughing today? It's not me, and I can almost bet it's not you either.

So what can we do to help ensure that our money isn't going down the drain when we drive? Well we can take the city bus, or buy a bike, maybe some good walking shoes, even purchase one of those "Hybrid" electric cars, but that isn't going to seem attractive to too many individuals. However, I have come up with an idea. While these oil and petroleum companies are definitely making the big bucks off of us at the pump, their stocks continue to grow stronger. Keeping that in mind, why not invest in their stock and take money back from them. It may not only mean paying steep gas prices, but also paying them monthly for dividend reinvestment purposes, but the return could mean actually taking money back from them.

Shell Transport and Trading Plc (NYSE:SC) is one of the least expensive petroleum stocks on the market and over the past year their stock has been on the rebound, setting new 52-week highs on the way. I like their stock because it's reasonably priced and has yet to touch the bottom of its March 03 regression channel since getting into this trend.

Shell expects to see a sales percentage growth rate of 21.12 percent over the next year, 10.63 percent over the next three years, and 16.60 percent over the next five years. The company expects their earnings per share to grow by 35.31 percent over the next year and a whopping 106.45 percent over the next five years. I believe this is the highest earning per share increase expectation that I have ever seen and I feel that SC could see the upper 75-100 range within the next five years, based upon this upbeat expectation.

In regards to price performance SC ranks in the upper 33% of its industry. Shell has a 52-week price change of 8.63 percent.

Revenues for the company are reportedly 82.40 billion, which tabulates out to a 51.539 revenue per share. Their current profit margin is approximately 5.72 percent. Shell's trailing Price Earnings is 15.46 on an intraday scale.

I am hopeful that SC is much like our 9/26/03 pick on XOM, in that we can gain more than 15% in less than a year. Shell offers an annual dividend of 1.6463 per share owned, which tallies out to an annual yield of 3.73 percent. Shell expects to see a dividend percentage growth rate of 5.74 percent over the next year, 7.45 percent over the next three years, and 2.87 percent over the next five years.

Before I put an end to this column I would like to leave you with a thought. The last time I saw gas prices under a dollar was 1998. Now the average price of a gallon of gasoline is over $2.00. I am forecasting that six years from now the average cost of gasoline will be well over $3.50. Therefore, I advise you not to laugh when I say this... Six years from now you pay $2.00 to travel 5-7 miles in your automobile. But look at the bright side; six years from now you will have a healthy and mature investment in the same companies that are banking on our need to drive from point A to point B.

This ends another exciting episode of the DripAdvisor.com Drip of the Week. Stay tuned next week, as we will spotlight another stock worthy of the DripAdvisor.com limelight.

Until Next Week,
Nich Sheldon
Editor

Broker Recommendations

Strong Buy         2
Buy                2
Hold               7
Sell               2
Strong Sell        1

Brokers Covering  14


DRIP Information:
Shares to Qualify = 1
Auto-reinvestment = No
Accept Foreign Accounts: Yes
Temper Enrollment: Yes

Min/Max Investment = $25-$Unlimited


Reinvestment Fees - 
Dividend investment fees: $2.50 +$0.07 per share
Cash investment fees: $2.50 +$0.07 per share
Auto reinvestment fees: N/A


Transfer Agent:
Bank of New York
888-269-2377


Corporate Headquarters:
Shell Centre
London, EN SE1 7
Phone: (212) 218-3113
Fax: (212) 218-3114



 
 

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