BP (BP), Shell (SHELL): Should you keep an eye on these oil giants?

May 09, 2022 02:52 AM PDT | By Rishika Raina

BP (BP), Shell (SHELL): Should you keep an eye on these oil giants? — Image source: Kodda,shutterstock.com

Highlights

Windfall tax on oil giants won’t harm the UK pensioners as not even 0.2% of BP and Shell shares are owned by the main pension funds of the UK.

The portfolios of BP and Shell are quite diversified, and the US investment companies have the biggest holdings in both the oil giants.

UK-based oil giants Shell and BP have been facing immense pressure of a windfall tax lately as they are making record profits in current situation. However, this idea of a windfall tax on these oil giants was opposed on the premise that the retirement incomes of the UK savers who have invested in these companies would be harmed.

Oil giants may face windfall tax due to recording high profits

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But according to a recent report by the Common Wealth thinktank, not even 0.2% of BP and Shell shares are owned by the main pension funds in the UK. Instead, the US investment companies have the biggest holdings in both the oil giants. These comprise of Vanguard, Blackrock, as well as some wealthy Norwegian pension funds.

The decision of levying a windfall tax on oil giants including BP and Shell was opposed as adversaries believed that the tax would push the companies to cut back on investments as well as dividend pay-outs, making the shareholders suffer. According to them, dividends were a passive source of income for ordinary people and the tax would redirect these pay-outs away from the shareholders, affecting their pension support.

But the recent report stated that the portfolio of the oil giants is highly diversified and thus the windfall tax on BP and Shell won’t hurt the UK pensioners.

Let’s look at the share price performance of the two oil giants.

BP plc (LON: BP)

Oil and gas supermajor BP reported record high quarterly profits worth £18 billion recently. Even if the windfall tax is implemented, the company is planning to make investments of around £18 billion in the business during the course of the next eight years.

Oil giants may face windfall tax due to recording high profits

2022 Kalkine Media®

BP plc’s shares were up by 0.55% as the market opened at around 8 AM (GMT+1) on 9 May 2022, at GBX 429.00. With a market cap of £83,319.31 million, the FTSE 100 company has provided its shareholders with a return of 36.89% over the last one year as of 9 May 2022. The company is currently offering a dividend yield of 4.1% a year.

Shell Plc (LON: SHEL)

Globally leading oil and gas company Shell has also reported record high quarterly profits recently, worth around £7.3 billion. Amid soaring energy bills, the Q1 profits of the company have increased the pressure of a windfall tax on it.

Shell plc’s shares were up by 0.72% as the market opened at around 8 AM (GMT+1) on 9 May 2022, at GBX 2,316.00. With a market cap of £172,538.78 million, the FTSE 100 company has provided its shareholders with a return of 61.94% over the last one year as of 9 May 2022. The company is currently offering a dividend yield of 3.4% a year.

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