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

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

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

LONDON --

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.

GKN
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.

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Stocks Mentioned

Royal Dutch Shell plc Stock Quote
Royal Dutch Shell plc
RDS.B
GKN plc Stock Quote
GKN plc
GKN
Royal Dutch Shell plc Stock Quote
Royal Dutch Shell plc
RDSB
RSA Insurance Group plc Stock Quote
RSA Insurance Group plc
RSA

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