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This is Why Royal Bank (RY) is a Great Dividend Stock
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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Royal Bank in Focus
Headquartered in Toronto, Royal Bank (RY - Free Report) is a Finance stock that has seen a price change of 3.76% so far this year. The bank is paying out a dividend of $0.81 per share at the moment, with a dividend yield of 3.95% compared to the Banks - Foreign industry's yield of 2.1% and the S&P 500's yield of 1.47%.
Taking a look at the company's dividend growth, its current annualized dividend of $3.24 is up 1.7% from last year. Royal Bank has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 7.14%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Royal Bank's current payout ratio is 54%. This means it paid out 54% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, RY expects solid earnings growth. The Zacks Consensus Estimate for 2020 is $6.45 per share, with earnings expected to increase 8.77% from the year ago period.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, RY is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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This is Why Royal Bank (RY) is a Great Dividend Stock
Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Royal Bank in Focus
Headquartered in Toronto, Royal Bank (RY - Free Report) is a Finance stock that has seen a price change of 3.76% so far this year. The bank is paying out a dividend of $0.81 per share at the moment, with a dividend yield of 3.95% compared to the Banks - Foreign industry's yield of 2.1% and the S&P 500's yield of 1.47%.
Taking a look at the company's dividend growth, its current annualized dividend of $3.24 is up 1.7% from last year. Royal Bank has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 7.14%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Royal Bank's current payout ratio is 54%. This means it paid out 54% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, RY expects solid earnings growth. The Zacks Consensus Estimate for 2020 is $6.45 per share, with earnings expected to increase 8.77% from the year ago period.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, RY is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).