Should You Buy Shell Stock Ahead of a Potential 20% Dividend Hike Next Year?

In an uncertain macroeconomic environment, boosting dividend payouts is a smart move. Higher yields give shareholders confidence, as companies that can pay up are likely to be more financially stable. In turn, investors tend to reward these resilient, income-paying names with long-term holdings. 

Shell (SHEL) is one company hoping to stand out with its dividend policies. Analysts predict the company could increase its dividend by 10%-20% as early as 2026, supported by strong cash flow and share buybacks, which Barclays analysts estimate will come in at $14 billion in 2025. With Shell’s dividend yield already standing out at nearly 4%, this potential hike could make its stock even more appealing.

Let’s explore Shell’s financial performance and strategic initiatives to understand what makes this prediction so compelling.

Shell’s Financial Performance

Shell (SHEL) is a global leader in the energy sector, with expertise in the exploration, production, refining, and marketing of oil (CBM25) and natural gas (NGJ25), as well as the manufacturing and marketing of chemicals. 

The company has gained 15% in the year to date and 7% over the past 52 weeks.

Shell’s financial engine roared to life in its Q4 2024 earnings report, released on Jan. 30, 2025. The company posted adjusted earnings of $3.7 billion for the quarter, contributing to a full-year adjusted earnings of $23.7 billion. 

What's truly remarkable is Shell's cash flow from operations, which hit $13.2 billion in Q4 and an astounding $54.7 billion for the full year – the second-best year on record. This cash-generating prowess allowed Shell to return roughly $23 billion to shareholders in 2024.

Shell’s valuation metrics paint an interesting picture. The company currently trades at a forward price-earnings ratio of 9.7x. The company’s price-sales ratio of 0.7x is lower than the sector average and could indicate an undervalued stock with growth potential.

The company’s forward dividend stands at $2.86, with a yield of 4%.

But it’s not just about financial metrics. Shell has been making strides in operational efficiency and sustainability. The company achieved a structural cost reduction of $3.1 billion by the end of 2024, ahead of its 2025 target. Moreover, Shell abated over 1 million tonnes of CO2 from its operations in 2024, keeping Scope 1 and 2 emissions flat. This balance of financial performance and environmental responsibility positions Shell well for the future of energy.

Shell’s Strategic Initiatives 

Shell is making bold moves to strengthen its position in the global energy market, with a focus on expanding its natural gas and LNG operations. Boosting production and securing long-term growth could support the anticipated dividend hike analysts are predicting for 2026.

Shell has secured a crucial approval for its Crux project in Australia. The National Offshore Petroleum Safety and Environmental Management Authority has given the green light for Shell to install key infrastructure linking the Crux field to the Prelude floating LNG facility. 

This project, with the first gas expected in 2027, will involve a remotely operated platform and five initial wells. It’s a testament to Shell’s long-term vision, as Crux is seen as vital for sustaining operations at one of the world’s largest floating gas plants.

Shell is also making plans in Brazil. The company’s subsidiary, Shell Brasil Petróleo, has taken the Final Investment Decision for the Gato do Mato deep-water project in the pre-salt area of the Santos Basin. This move into Brazilian waters showcases Shell’s commitment to diversifying its portfolio and tapping into promising offshore resources.

Analysts Weigh In on Shell’s Future

Analysts are showing strong confidence in Shell’s future, with a consensus that the energy giant is well-positioned for growth and shareholder value.

The consensus among analysts further strengthens the case for Shell. The 21 analysts in coverage have a consensus “Strong Buy” rating with an average price target of $80.57. This represents upside potential of approximately 11.9% from the current price. 

The Bottom Line

So, should you buy Shell stock ahead of a potential 10%-20% dividend hike? Absolutely. 

With a strong financial foundation, strategic growth initiatives, and analysts’ “Strong Buy” consensus, Shell offers both income potential and capital appreciation. Its robust dividend yield and promising price targets make it attractive for investors seeking long-term value in the energy sector.