Royal Dutch Shell is our share tip of the week – five reasons to invest

Edmund Shing explains that despite the current collapse in crude oil prices, now is the perfect time to invest in Royal Dutch Shell.

1) Giant company

Royal Dutch Shell is a giant company in the oil and gas sector and is the dominant constituent of the FTSE 100 index (UK code: RDSB).

2) Low oil prices

The collapse in oil prices recently has seen Brent crude fall from $100 (£68, €89) a barrel in the middle of 2015 to $33 a barrel today. It's no surprise then to see that Shell's share price has fallen by 20% over the past year.

3) BG Group takeover

But Shell investors should start to benefit in profitability from the takeover of rival oil company BG Group. The merger will see cost-cutting which in the long term will boost profits.

4) It's cheap

The collapse in oil prices means shares in Royal Dutch Shell are very cheap today, with oil companies among most investors out of favour.

5) Terrific value

But don't let that deter you. For the value investor, Shell promises a very sweet dividend income of 8.6%. So for every £100 of Shell shares you buy today, you will get an annual income of £8.60 (as of 3 February).

Edmund Shing is Global Head of Equity Derivative Strategy at BNP Paribas in London. He holds a PhD in Artificial Intelligence.