Old Mutual UK Select Equity fund manager Richard Moore says troubled oil giant Shell will be supported by the stock’s dividend yield.Last week the firm, a key constituent of the UK’s dominant oil & gas sector, fell 0.5%. This followed a 7% drop on news that it had slashed its reserves estimates by 20%, but Moore does not expect “significant weakness” from now on. His view on dividends is shared by DWS UK Equity Income fund manager Graham Ashby. Prospective yield to the end of December for Shell is 4.3%, says Ashby, compared with 3.1% for the UK equity market: “This is a substantial premium over the equity market of nearly 40%. This figure is also historically high for Shell.” He believes there is a third reason for liking Shell. He says the company has an advantage over BP because its dividend is paid in sterling rather than dollars. December saw the greenback weaken, reaching an 11-year low against the pound on the last trading day of 2003. Since then, the dollar has continued to cause concern. Ashby says: “If you invest your pound in BP, it would have to put up the dividend an awful lot to get the same returns.” Moore says that the outlook for the oil & gas sector is good. He is currently 2.8% overweight the sector compared with his FTSE All-Share index benchmark. “Shell is a management issue,” he says. “This is separate from what is going on with the fundamentals, which are very strong with the oil price favourable. A lot of the resource-based companies in general look in a strong position to see earnings upgraded this year.” He likes BP, which, he says, is benefiting from Shell’s problems. Shell is currently an underweight in Moore’s portfolio: “With less oil than it thought it had, the company will have to put more cash into exploration or make an acquisition that would dilute earnings and so would also be a negative. The company’s past record for exploration has not been the best.” Ashby appears more upbeat on Shell than Moore: “These things are more sentiment-driven rather than being the effect of any fundamental change. There has been a bit of a disproportionate impact on the share prices.” The impact of Shell’s surprise announcement also had implications for bond markets. Standard & Poor’s called into question the firm’s AAA long-term rating by placing it on CreditWatch.