If you’ve ever thought about buying into Shell stock before, you’ll likely have found that there are two different types of investment – Shell A or B shares. Shell, of course, is the world-leading oil brand – and it just so happens that they have two different types of stock available for you to invest in. In this quick guide, I’m going to take you through what you need to know about RDSA vs RDSB stock, and which option is likely to work best for you in the long run.
A brief history lesson, first – the reason why there’s a division in the share listings lies in the fact that Shell is, ultimately, a partnership. It’s a UK Dutch setup on the whole, and this has led to the company also becoming the third biggest brand on the planet in terms of revenue. That’s potentially a huge factor for investors and is of course one of the main reasons why so many people buy their stock.
However, COVID-19 and Brexit have potentially changed things around a little for would be Shell investors, meaning there are a couple of new considerations to think about. It’s easy enough to buy Shell stock, but is it still necessarily the smartest option on the London Stock Exchange? Let’s take a look.
What’s The Difference Between RDSA and RDSB Shares?
Crucially, RDSA has links to the Royal Dutch Shell Company, while RDSB has links to the Shell Transport and Trading Company.
To break this down even further, RDSA is based in the Netherlands, while RDSB is based in the UK. The main differences really are as simple as that.
However, this also means that A falls under Dutch tax, while B falls under UK tax. There’s also the difference in share percentage.
RDSA controls around 57.5% of all company shares. The remainder, naturally, is overseen by RDSB. Shareholders will also have to pay withholding tax on RDSA, at a rate of up to 25%, but with RDSB, there’s no such levy.
Naturally, as you’d expect, RDSB trades in the Euro, while RDSB trades in the GBP (Pound Sterling). RDSB also has voting power, while RDSA only really offers powers in the form of asset priority should bankruptcy occur.
It’s worth keeping in mind the main difference between Shell A and B shares depends on where you’re based in the world. But does this necessarily make one better than the other? Let’s take a look and find out for certain.
RDSA vs RDSB: Which is Better?
That all depends on where you are resident! It makes more sense for British investors to choose RDSB over RDSA.
That’s because the withholding tax difference really does make an impact. This means that you stand to get the full amount of any dividends with these shares.
EU residents, meanwhile, won’t see a difference regardless of the shares they choose. When it comes to RDSA vs RDSB for EU member states, withholding tax doesn’t apply at all. This, of course, means anyone outside the EU will be liable for this tax if they fall outside the member zone.
15% to 25% is the current threshold for the withholding tax applied to these shares, and while that might not sound too bad on the surface, it is still a reasonable chunk of money to give away. Therefore, smart advice would be to look largely at RDSB.
RDSB may not have majority share, but UK investors will have access to voting power, too, and won’t have to pay any taxes additional to what they’d normally expect on dividend payouts.
Do Shell Shares Pay Dividends?
Regardless of whether you eventually choose Shell A or Shell B shares, you will still receive dividends on this stock.
The main differences, of course, lie in the majority share oversight, as mentioned, and the withholding tax conundrum. Dual listed shares and companies may seem a little confusing to those investors who have little experience with dividends under their belts. However, the rules are the same as you’d expect elsewhere.
Shell splits up its stock in this way as a result of its slightly complex ownership. Shell is an absolutely huge company, meaning that it’s likely to be a lucrative spot if you really know your trading, but when it comes to dividends, RDSB is always likely to give you more money passively if you are trading from within the UK.
Where Can I Buy Shell Shares?
Shell shares are available from all leading UK trading platforms. In fact, it’s pretty rare you won’t find either RDSA or RDSB through one of the bigger platforms I’ve reviewed for you across the blog before.
For example, if you are already using an investment platform such as Freetrade, Trading 212 or Hargreaves Lansdown, you’ll be able to easily find RDSB and RDSA shares in the listings. You can also take advantage of free stocks if you are looking to sign up with a new platform.
Conclusion
All in all, buying into Shell shares could be a pretty solid way to make a passive income, assuming the dividend continue, however the company has seen difficulty in recent years with regard to turnover. That said, it does still ride high on the London Stock Exchange.
All things considered, some may advise to exercise some caution when it comes to investing in either RDSA or RDSB moving forwards. After all, the pandemic – not just Brexit – has changed matters for investors over the past few months.
This means that the quality of price of your dividends may not necessarily be as much as you’d normally expect. That said, many people are sticking with Shell, so it may be worth riding things out to see where it all ends up.
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