Royal Bank of Canada Pays 4.2% Dividend Yield (RY)
By: Ned Piplovic,
The bank’s current streak of annual dividend hikes stands at eight consecutive years. In the past seven of those eight years, the company delivered two dividend hikes per year. In addition to that current streak of consecutive annual hikes, the company also managed to boost its annual dividend payout 18 out the last 20 consecutive years.
In addition to providing investors with a steadily rising source of dividend income, the Royal Bank of Canada also offers long-term asset appreciation with only few occasional pullbacks. Unfortunately for the company’s shareholders, 2018 was one of those pullback years. The share price doubled over the 24-month period leading up to the beginning of 2018 but declined 16% for the rest of the year. Even dividend distribution only managed to soften the blow and reduce total shareholders losses to 12.8% for the trailing 12 months.
However, the share price could reverse its current downtrend quickly on the bank’s solid fundamentals. The company’s revenue ranged between $10 billion and $11 billion each period over the last five quarters. Additionally, net income grew consistently from $2.8 billion in the fourth quarter of 2017 to $3.3 billion in the last period of 2018. Diluted earnings per share (EPS) also rose every quarter over the same time period from $1.88 to $2.20. The bank’s dividend payout ratio of 44% in the fourth quarter of 2018 is still at a sustainable level and well within the company’s target range of 40% to 50%.
Investors convinced that the share price will reverse course and start recovering soon should do their research and take a position prior to the company’s next ex-dividend date on January 23, 2019, and make sure to be eligible for the next round of dividend distributions on the February 23, 2018, pay date.
Royal Bank of Canada (NYSE:RY)
Headquartered in Toronto, Canada and founded in 1864, the Royal Bank of Canada (RBC) offers diversified financial service worldwide. The bank’s Personal & Commercial Banking segment offers customary banking products, including checking and savings accounts, home equity and auto financing, mutual funds, self-directed brokerage account, credit cards to individual customers. Through its Wealth Management business segment, RBC offers investment, trust, banking and other wealth management solutions to high net worth clients. The Insurance segment offers an assortment of life, health, home, auto, travel, wealth, annuities and business insurance products. Additionally, the bank’s Investor & Treasury Services segment provides asset and cash management, transaction banking and treasury services. Lastly, the Capital Markets segment offers corporate and investment banking, as well as equity origination and trading services for corporations, institutional investors, governments and central banks.
Following a two-year growth streak, the share price reached its 52-week high of $86.75 on January 22, 2018. After peaking early in the trailing 12-month period, the share price reversed direction and declined more than 23% before reaching its 52-week low on 12/24/2018. Like many other companies whose share prices bottomed out on Christmas Eve, RBC’s share price recovered slightly and closed on January 2, 2019 at $68.92. While still more than 20% below the peak from January 2018 and 13.6% lower than one year earlier, the January 2, 2018 closing price was almost 4% higher than the 52-week low.
The bank’s current $0.72 (CA$0.98) quarterly dividend distribution is 4.3% higher than the $0.69 (CA$0.94) dividend from six month earlier and 7.7% above the $0.67 (CA$0.91) quarterly payout amount paid one year ago. This current quarterly distribution corresponds to a $2.88 annualized payout and a 4.2% forward dividend yield. The bank’s current dividend yield is more than 18% higher than the average dividend yield of the entire Financials sector and nearly 54% above the simple average dividend yield of the bank’s peers in the Money Center Banks industry segment.
While avoiding dividend cuts in the aftermath of the 2008 financial crisis, the bank did skip two years of dividend hikes and paid the same $2.00 annual dividend in 2009 and 2010 as it did in 2008. However, since resuming dividend hikes in 2011, the company has doubled its annual payout amount, which is equivalent to a 7.8% average annual growth rate. Even with a couple of missed dividend hikes, the company managed to enhance its annual dividend payout more than eight-fold over the past two decades and maintain an average growth rate of 11.2% per year.
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Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.