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A £10,000 investment in Shell (LSE:SHEL) shares 29 years ago — when Google’s graph oddly begins — is now worth £22,085. That’s a return of 120.85% — Shell currently trades at around £26.41 per share, up £14.45 since 1996.
While the stock has grown steadily over nearly three decades, this performance tells a nuanced story about Shell’s long-term value for shareholders. It’s growth, but it’s not really all that strong.
Of course, investors will have received dividends during the period. The dividend yield in 1996 was reportedly equal to around 3.4%. There have been periods without dividends during the last 29 years, but that will have aided the total returns during the period.
Today, Shell’s dividend yield, at roughly 3.9%, is one of its more appealing features for investors seeking income. The payout ratio remains conservative at around 22%, supporting dividend sustainability and modest growth over time. This yield is competitive for the sector and provides some cushioning against the company’s less stellar share price returns.
Today’s valuation
Shell’s valuation today is relatively attractive, but may not be overly compelling when we consider its track record for long-term returns. The stock trades at 11.3 times earnings (price-to-earnings — P/E) from the past 12 months, slightly below the sector median of 12.3.
Its forward P/E ratio of 11.4 also fares well in the sector context, representing a modest discount compared to American energy giants that typically trade at higher multiples.
Shell’s price-to-sales and enterprise value (EV) ratios reinforce that its valuation remains reasonable. For example, EV-to-sales stands at 0.94 compared to a sector median closer to 2.
Looking beyond valuation, Shell’s earnings growth expectations are mixed. Consensus estimates point to a difficult short-term with a 15.7% decline in earnings per share for 2025, followed by rebounds averaging around 9% growth annually from 2026 through 2028. This reflects the cyclically sensitive and capital-intensive nature of the energy sector.
The company’s capital structure is also interesting. Its significant debt of $75.7bn is balanced by $32.7bn in cash. This amount of leverage is considerable but manageable given Shell’s cash flow and asset base. Yet this level of net debt is above average for its peer group.
The bottom line
Despite steady gains, Shell’s share price appreciation of approximately 120% since 1996 highlights a middling performance for a 29-year investment horizon. Many shareholders would expect more from such a blue-chip stock over three decades.
However, it’s worth recognising that many of the biggest companies of the late 1990s are no longer with us. Steady growth is better than going bust. Enron, Northern Rock, and Marconi are just a few of the ’90s blue-chip companies that failed.
So, is Shell stock worth considering today? Well, many investors will believe their portfolio needs exposure to the energy sector, and Shell certainly isn’t a bad option so is worth a look. My personal opinion is that the Big Five (Chevron, Exxon, BP, Total and Shell) oil companies broadly trade in line with each other when accounting for debt and profitability metrics.
