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Why Shares of Royal Dutch Shell Fell More Than 10% in August

John Bromels, The Motley Fool

What happened

Shares of Royal Dutch Shell (NYSE: RDS-A)(NYSE: RDS-B) fell more than 10% in August, according to data provided by S&P Global Market Intelligence. Shell has two classes of American depositary receipts (ADR) shares that trade on the New York Stock Exchange. The B shares, down 12.2%, fared slightly worse than the A shares, which were only down 11.6%. This was a bit worse than other oil majors, although many stocks in the energy sector retreated in August thanks to a decline in oil prices.

So what

The bulk of the drop came on the first day of the month, as Shell reported worse-than-expected Q2 2019 earnings. Quarterly earnings were down 50% -- you read that right -- fifty percent, both sequentially and year over year. In a press release, Shell CEO Ben Van Beurden blamed "lower realized oil, gas and LNG prices, [and] weaker realized chemicals and refining margins" for the drop. 

Black oil drums tipped over spilling black liquid on the floor.

Royal Dutch Shell's usual outperformance wasn't on display in August. Image source: Getty Images.

Investors became accustomed to Shell shrugging off weakness in the energy sector. For example, in Q4 2018, when oil prices toppled, Shell's realized gas prices soared, boosting earnings 48% year over year. In Q1 2019, when other oil majors were seeing weaker margins in their downstream segments, Shell managed to buck the trend again, thanks in part to the bulk of its refining and chemical operations being located outside the U.S. 

But in Q2, it appears that the industrywide trends finally caught up to Shell, although the company still managed to churn out impressive cash flow -- up 16% year over year -- despite the earnings miss.

Now what

While Shell had the worst August performance of the oil majors, none of its peers escaped unscathed. French giant Total saw shares slip by 3.5% while giant ExxonMobil's stock price slumped 7.9%. As long as oil prices stay at current levels or fall further, Shell shareholders may be in for a rocky ride, along with the industry, in general.

Still, this means Shell's stock price is the lowest it's been all year... and its dividend yield the highest. If you're a long-term dividend investor looking for a buying opportunity, this may be an ideal moment to nab some shares.

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John Bromels has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

This article was originally published on Fool.com