The Shell (LSE: SHEL) share price dipped slightly Thursday morning (5 February), after the oil giant posted full-year results. CEO Wael Sawan described the year as one of “accelerated momentum, with strong operational and financial performance.”

He added: “We generated free cash flow of $26bn, made significant progress in focusing our portfolio and reached $5bn of cost savings since 2022.”

The final quarter saw income attributable to shareholders drop 22% from the previous quarter, to $4.1bn. The company put it down to unfavourable tax movements, tighter margins and lower realised prices. The figure was boosted by asset disposals — part of that portfolio focusing.

For the full year, income attributable to shareholders was up 11% to $17.8bn, with tax movements in this case favourable. Realised prices were still down, though. With the year of cheap oil we’ve had — Brent Crude is at $68 per barrel at the time of writing — that’s not surprising.

Cash rewards

Total shareholder returns in the final quarter came to $5.5bn. That includes $3.4bn in share buybacks and $2.1bn in dividends. Oh, and Shell announced a new $3.5bn buyback due for completion by first-quarter results time.

The full-year dividend of 106p represents a 3.7% yield on the previous day’s closing price. That’s above the 3.2% analysts expect from the FTSE 100 for the 2025 year. It’s up 4% over the year, and is more than twice covered by earnings. To me, Shell sounds like an ideal passive income candidate.

Shell’s balance sheet showed net debt of $45.7bn at 31 December. That’s up from $41.2bn in September, and from $38.8bn at the end of 2024. It’s a 17.7% rise year on year. In some cases I’d be concerned to see debt rising so much. But with oil prices lower, I’m not too surprised. And as it’s still only around 20% of Shell’s market cap, I’m really not too worried about it.

What does it mean?

This looks like yet another ‘Big Oil generates huge amounts of cash for shareholders’ story. And on that score alone, it has to be one for long-term dividend investors to consider.

The five-year rise in the Shell share price — up 119% — looks great at first. But it’s misleading, starting in the post-Covid depths — and at a time when everyone seemed to think the end of oil was nigh. Shell shares today are only a few percent above their highest point of 2019.

So is Shell cheap?

We’re looking at a forward price-to-earnings (P/E) ratio of 13, dropping to 11 based on 2027 forecasts. And on that alone, I’d say the Shell share price looks too low. I’m just not seeing the premium I think it deserves to cover the resilience of such a cash-generative company selling essential products.

But then how essential will hydrocarbons be in the long term? That’s where the big uncertainty lies. And it seems inevitable that attention will swing back to climate change and the need for low-carbon energy.

Where does that leave Shell today? Definitely one to consider, I’d say — but with cautious eyes on the long-term energy market.