Advertisement
Australia markets closed
  • ALL ORDS

    8,153.70
    +80.10 (+0.99%)
     
  • ASX 200

    7,896.90
    +77.30 (+0.99%)
     
  • AUD/USD

    0.6510
    -0.0008 (-0.12%)
     
  • OIL

    83.11
    -0.06 (-0.07%)
     
  • GOLD

    2,254.80
    +16.40 (+0.73%)
     
  • Bitcoin AUD

    108,082.85
    +125.18 (+0.12%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • AUD/EUR

    0.6039
    +0.0005 (+0.08%)
     
  • AUD/NZD

    1.0905
    +0.0002 (+0.02%)
     
  • NZX 50

    12,105.29
    +94.63 (+0.79%)
     
  • NASDAQ

    18,254.69
    -26.15 (-0.14%)
     
  • FTSE

    7,952.62
    +20.64 (+0.26%)
     
  • Dow Jones

    39,807.37
    +47.29 (+0.12%)
     
  • DAX

    18,492.49
    +15.40 (+0.08%)
     
  • Hang Seng

    16,541.42
    +148.58 (+0.91%)
     
  • NIKKEI 225

    40,369.44
    +201.37 (+0.50%)
     

Why Royal Bank (RY) is a Great Dividend Stock Right Now

Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, 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 the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Royal Bank in Focus

Headquartered in Toronto, Royal Bank (RY) is a Finance stock that has seen a price change of 13.47% so far this year. The bank is currently shelling out a dividend of $0.85 per share, with a dividend yield of 3.64%. This compares to the Banks - Foreign industry's yield of 1.59% and the S&P 500's yield of 1.37%.

ADVERTISEMENT

Looking at dividend growth, the company's current annualized dividend of $3.39 is up 6.4% from last year. In the past five-year period, Royal Bank has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.90%. 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 55%, meaning it paid out 55% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, RY expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $7.74 per share, representing a year-over-year earnings growth rate of 30.52%.

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. However, not all companies offer 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 must be conscious 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 also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Royal Bank Of Canada (RY) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research