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Why Royal Bank (RY) is a Top Dividend Stock for Your Portfolio
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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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 -1.49% so far this year. The bank is currently shelling out a dividend of $0.99 per share, with a dividend yield of 3.99%. This compares to the Banks - Foreign industry's yield of 4.01% and the S&P 500's yield of 1.61%.
In terms of dividend growth, the company's current annualized dividend of $3.98 is up 0.5% from last year. Over the last 5 years, Royal Bank has increased its dividend 5 times on a year-over-year basis for an average annual increase of 7.07%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Royal Bank's current payout ratio is 47%, meaning it paid out 47% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, RY expects solid earnings growth. The Zacks Consensus Estimate for 2024 is $8.60 per share, representing a year-over-year earnings growth rate of 2.02%.
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. But, not every company offers a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that RY is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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Why Royal Bank (RY) is a Top Dividend Stock for Your Portfolio
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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 -1.49% so far this year. The bank is currently shelling out a dividend of $0.99 per share, with a dividend yield of 3.99%. This compares to the Banks - Foreign industry's yield of 4.01% and the S&P 500's yield of 1.61%.
In terms of dividend growth, the company's current annualized dividend of $3.98 is up 0.5% from last year. Over the last 5 years, Royal Bank has increased its dividend 5 times on a year-over-year basis for an average annual increase of 7.07%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Royal Bank's current payout ratio is 47%, meaning it paid out 47% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, RY expects solid earnings growth. The Zacks Consensus Estimate for 2024 is $8.60 per share, representing a year-over-year earnings growth rate of 2.02%.
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. But, not every company offers a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that RY is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).