Royal Dutch Shell (NYSE:RDS-B)

Shell has improved the cost structure of its business to compete in a world of cheaper oil. Shell produces strong cash flow, which it has used recently to pay down debt and retire shares. As the oil sector has continued to underperform in what may turn out to be a downcycle, these shareholder-friendly moves are exactly what I like to see.

The market, however, does not seem to appreciate Shell's improvement trading at a lower EV/EBITDA to its major peers despite improvement showing better ROIC and ROE.

Shell pays out a 6.3% dividend yield, which may cause some concern that a dividend cut may be coming. Shell's payout ratio of 75% seems quite high but compared to industry peers like Exxon and BP which are currently financing dividends with debt; the dividend may be more sustainable than it appears.

Shell may be a little riskier than Chevron, which appears to be the gold standard in the industry, however, Shell may provide the more upside trading at a lower multiple with a higher FCF yield. In the event of a flight to quality, I expect yield seekers to be keen on the oil industry.

Nice dividend. Buying while oil is down.