Please ensure Javascript is enabled for purposes of website accessibility

3 Blue Chip Bargains: Royal Dutch Shell, GKN, and RSA Insurance Group

By David O’Hara - Apr 8, 2013 at 11:18AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Royal Dutch Shell, GKN, and RSA Insurance Group have all seen their shares fall in recent weeks. So, are they now worth picking?


Royal Dutch Shell
Shares in super-major Royal Dutch Shell (RDSB) (RDS.B) are down 1.4% so far this year. The shares have actually declined 5.4% in the last month alone.

In the last month, oil prices have fallen almost 5%. There are three reasons for this, all related to demand for the product.

First, the shale gas boom in the U.S. has delivered a plentiful alternative source of energy. Second, fears of global economic stagnation have inspired futures traders to start selling oil contracts. Third, a report last week confirmed that U.S. oil inventories reached highs not seen in over 20 years.

Analysts expect that Shell will pay $1.84 in dividends for 2013 and make $4.14 per share of profits. That's a prospective yield of 5.7% and a price-to-earnings (P/E) ratio of just 7.9.

Shares in GKN (GKN) have lost 10.4% in the last month. As things stand today, GKN is trading on a historic P/E of 8.1, with a forecast dividend of 3.2%.

As a big supplier of automotive parts and engineering services, GKN's fortunes are linked to the notoriously cyclical automotive industry. Cyclical stocks have less earnings visibility than most. The result is that they usually trade at a discount to the market.

As more people move into car ownership in countries such as India and China, any industry downturn will likely be less severe than has been suffered in the past. I would be a buyer of GKN today if the yield was higher.

RSA Insurance
Shares in RSA Insurance (RSA) have not been as low as this since November 2012. Since the company announced a dividend cut with its final results, investors have lost 30% of the market value of their holding.

Though recent times have been rough for RSA shareholders, the current share price looks attractive for new entrants.

The fact that RSA has already cut its dividend makes another cut less likely in the short term. I estimate that the payout for 2013 will be around 6.2 pence per share. That's a yield of around 5.6% at today's price. Analysts expect 12.4 pence per share of profits for the year, putting the shares on a P/E of 8.8 times forecasts.

Though RSA now offers a large, well-protected yield, our analysts here at the The Motley Fool believe that they have found an even better dividend share for 2013. To help you benefit from their detailed analysis, they have prepared a special free report "The Motley Fool's Top Income Share for 2013." To get the lowdown on this opportunity, click here and get your totally free copy of the report today.


Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Royal Dutch Shell plc Stock Quote
Royal Dutch Shell plc
GKN plc Stock Quote
GKN plc
Royal Dutch Shell plc Stock Quote
Royal Dutch Shell plc
RSA Insurance Group plc Stock Quote
RSA Insurance Group plc

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/23/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.