The Market Leader - Royal Dutch Shell (RDS.A)

While competitors Chevron (CVX) and ExxonMobil (XOM) turned in workman-like performances when they reported financial results, the star of the sector appears to be Royal Dutch Shell (RDS.A).

The petrochemical giant, ranked number 1 in the Fortune Global 500 in 2009, recently delivered third quarter 2010 earnings. Net income came in at $3.46bn compared to $3.27bn for the prior year quarter.

This performance was boosted by a higher average oil price and $2 billion of asset sales so far in 2010.

This leaves the company trading on a dividend yield of above 5% and a historical price to earnings multiple of 13 times earnings.

Results have rebounded substantially from year-ago levels, driven by some improvement in industry conditions, and Shell’s (RDS.A) strategy. The company is seeing new growth, with improved earnings and cash flow, underpinned by a 5% increase in oil and gas production, a 22% increase in LNG sales and increased downstream volumes. This is a better performance from Shell (RDS.A), achieved despite continued difficult industry conditions in refining and natural gas markets.

The company is making good progress on implementing its strategy, with a focus on performance improvement, delivering a new wave of growth, and maturing the next generation of growth options for shareholders, with achievements in all of these themes during the quarter.

Shell (RDS.A) expects another $7-8bn worth of asset sales in 2010/11 which is likely to keep Royal Dutch Shell (RDS.A) cash flush for the next two years.

Growth is likely to come from three projects, including the "Jackpine" oil sands mine, a development in the Gulf of Mexico and BC-10 development in Brazil.

The company recently also acquired Arrow Energy Limited, an Australian gas play.

In line with other oil and energy stocks Shell (RDS.A) has not been the most inspirational performer in 2010 with the share adding just 10% over the last 12 months.

However for dividend investors, this tidying up of the Royal Dutch Shell (RDS.A) portfolio will ensure an underpin to the 5% dividend yield currently being enjoyed.

With the world an uncertain place, a yield of this nature is not to be sniffed at.