Saturday, April 11, 2015

My Mindset and Actions on this Oil Megadeal! (RDS B)

Fear stifles our thinking and actions. If we let fear make decisions for us we will lose money. Today I will take a look back at a post from June 27, 2014 the Amazing History of Oil. This was my first purchase for the portfolio and I bought Royal Dutch Shell plc (RDS-B). At the time it had the same dividend it does today .94 quarterly payout. When purchased it yielded 4.35% now it yields 6.25%. I also mentioned that it is good to leave dry powder available for future purchases if the stock price drops lower. The price has dropped lower and I have made two other purchases. The current yield for the portfolio is 5.38%. I mention all of this about the dividend because I like RDS-B as a income play and ca$h cow! I was content with that starting yield and am content with the yield I have now. I don't like losing money! Let me repeat that I don't like losing money when a company share price goes down but I understand why I bought it in the first place.

Understanding why the share price has suffered so much can ease fear. I know the underlining commodity oil has fallen 60%. While the position in RDS-B is down, its not down as bad as the commodity. The recent acquisition of BG Group also helps diversify the company away from just an oil company. Adding natural gas and liquid natural gas to the portfolio. The price paid for BG Group was a steep 52% premium over the recent current share price. This is expensive but all depends on future oil and gas prices. Shell did mention it was cheaper than finding the same amount of reserves if it had to explore itself. My opinion is we will have to wait and see how this deal is perceived 1 to 2 years from now and make a decision at that time. I do think we will see more mergers and depending if the price of oil stays here or drops may depend on if this deal was early. I personally think you take the deal when you feel its right. Shell's management has been around the block and made some good moves so I am putting my trust in them at the moment. 

After the third purchase RDS-B is 12.7% weighting in the SNB portfolio. I think the downside is limited unless oil finds new lows. 

Purchase history of RDS-B
  6/27/14    12 shares @ $86.80  yield 4.33%
10/16/14    15 shares @ $69.34  yield 5.42%
  4/10/15    20 shares @ $60.19  yield 6.25%  
Total shares 47.5434 @ $69.88  yield 5.38%


Disclaimer: This is a personal weblog. The opinions expressed here are my own. All data and information provided on this site is for informational purposes only. Please do your own research before investing.

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