Today, Shell trades at the kind of valuation that one might expect from a weaker company with worse prospects. Yet, the oil giant looks as strong as ever.
Shell's dividend is a thing of beauty. Year in, year out, Shell keeps paying up. In dollar terms, the dividend has not been cut since the second World War. Not only is the yield high, the cash payout is enormous. In 2011, Shell paid out more cash in dividends than any other U.K. company. It is expected to do the same again this year.
The average FTSE 100 share is forecast to yield 3.2%. This year, the market is expecting Shell to pay $1.84 in dividends. That equates to a forecast yield of 5.4%. Analysts expect Shell's dividend to increase 4.3% in 2014.
Only a handful of shares could likely yield more in 2013.
Today, Shell trades on just nine times last year's earnings per share. With 8.4% of earnings growth forecast for 2013, the P/E for this year is 8.3 times expected earnings.
The average FTSE 100 company trades on a historic P/E of 16.7. Average forecast earnings growth is slightly higher among other FTSE 100 constituents, at 9.5%. While Shell is cheaper than nearly all FTSE 100 companies, it is expected to grow more slowly than most.
This perception could be a result of recent falls in the price of crude oil. In the last three months, crude prices have fallen by around 9%. In that time, shares in Shell are off by 3%. While the price of oil will affect Shell's earnings, it has historically had little correlation with the company's share price.
Even if Shell is the cheapest share in the FTSE 100 today, that doesn't mean that the shares will go on to post huge rises. Our analysts here at the Motley Fool believe that they have found a better growth prospect. Like Shell, their top pick has a long history and is a dominant player in its markets. If you want to learn all about the opportunity that our team's top growth pick presents, get the free Motley Fool report, "The Motley Fool's Top Growth Share For 2013." This reserach is completely free and will be delivered to your inbox immediately. Just click here to get your copy today.
David O'Hara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.