Fossil fuel leviathan Royal Dutch Shell(LSE: RDSB) has been one of the FTSE 100's most lucrative stocks for many, many years, and particularly so for dividend chasers.
In recent years Shell has been subjected to heavy earnings weakness as a combination of crimped crude prices and a massive capex bill has weighed.
While these troubles have forced the driller to axe its progressive dividend policy (the 2016 dividend was again locked at 188 US cents per share), it has been able to keep financing market-topping yields via asset sales, an unhealthy situation for long-term investors.
Sure, glass-half-full investors would point to the huge potential of its BG Group acquisition in blasting earnings higher again. But of course the fruits of the tie-up are dependent on oil revenues taking flight again. And with shale production Stateside back on the gallop and OPEC tension undermining chances of the supply freeze exceeding summer, hopes of this are looking less-than-assured in my opinion.
The City sees no such trouble however, and analysts anticipate Shell will keep the dividend locked around 188 cents per share through to 2018, supported by earnings rises of 92% and 27% this year and next. Such predictions carry an enormous dividend yield of 6.8%.
Shell has plenty more divestments in the pipeline to meet these abundant predictions, even if dividend coverage remains woefully inadequate. Projected earnings of 181 cents per share this year actually outpace the estimated reward, while the dividend is covered just 1.2 times in 2018.
However, in the longer-term the oil play may struggle to keep this going should crushing market oversupply prevent revenues moving up, and should Shell's recent balance sheet improvement (net debt fell to $83bn as of December from $86.6bn three months earlier) grind to a halt.
Too much risk?
The realisation of the challenges WM Morrison Supermarkets (LSE: MRW) faces to keep its turnaround story chugging along was underlined by full-year results this month.
On the plus side, Morrisons announced that like-for-like sales (excluding fuel) rose 1.7% during the 12 months to January 2017, the first such rise for five years and a result that propelled profits 49.8% higher to £325m.
But investors engaged in fresh bouts of selling after the retailer, mirroring similar statements by its sector rivals, cautioned that "there are some uncertainties ahead, especially around the impact on imported food prices if sterling stays at lower levels."
Britain's supermarkets face the trouble of increasingly-squeezed margins as currency pressures hike supplier costs. At the same time, Morrisons and its mid-tier peers are already under pressure to keep slashing prices as the cheaper German outlets steadily expand.
The number crunchers expect Morrisons to keep its growth story rolling with rises of 14% and 7% in fiscal 2018 and 2019 respectively. However, I do not believe consequent P/E ratios of 19.4 times and 18.1 times fairly reflect the chances of these projections being derailed.
Like Shell, I believe much-less-risky FTSE 100 stocks can be located elsewhere.
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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Royal Dutch Shell B. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.