Assessing Dividend Performance and Sustainability
Royal Bank of Canada (RY, Financial) recently announced a dividend of $1.35 per share, payable on 2023-11-24, with the ex-dividend date set for 2023-10-25. As investors anticipate this forthcoming payment, it's crucial to examine the company's dividend history, yield, and growth rates. This article, using data from GuruFocus, delves into Royal Bank of Canada's dividend performance and its sustainability.
What Does Royal Bank of Canada Do?
Royal Bank of Canada, one of the two largest banks in Canada, provides a diversified range of financial services. The bank offers personal and commercial banking, wealth management services, insurance, corporate banking, and capital markets services. While its primary focus is on Canada, it also has operations in the U.S. and other countries.
A Glimpse at Royal Bank of Canada's Dividend History
Since 1989, Royal Bank of Canada has consistently distributed dividends, currently on a quarterly basis. The company has increased its dividend annually since 2010, earning it a place as a dividend achiever, a title given to companies that have increased their dividend each year for at least the past 13 years.
Breaking Down Royal Bank of Canada's Dividend Yield and Growth
Royal Bank of Canada currently has a 12-month trailing dividend yield of 4.80% and a 12-month forward dividend yield of 4.90%, indicating an expected increase in dividend payments over the next 12 months.
Over the past three years, Royal Bank of Canada's annual dividend growth rate was 6.80%. This rate decreased slightly to 6.60% per year over a five-year horizon. Over the past decade, Royal Bank of Canada's annual dividends per share growth rate stands at 7.50%.
Based on Royal Bank of Canada's dividend yield and five-year growth rate, the 5-year yield on cost of Royal Bank of Canada stock as of today is approximately 6.61%.
The Sustainability Question: Payout Ratio and Profitability
The dividend payout ratio of Royal Bank of Canada, standing at 0.51 as of 2023-07-31, provides insights into the proportion of earnings the company distributes as dividends. A lower ratio indicates that the company retains a significant part of its earnings, ensuring the availability of funds for future growth and unexpected downturns.
Royal Bank of Canada's profitability rank of 6 out of 10 suggests fair profitability. The company has consistently reported positive net income over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
Royal Bank of Canada's growth rank of 6 out of 10 suggests that the company has a fair growth outlook. The company's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Royal Bank of Canada's revenue has increased by approximately 3.00% per year on average.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Royal Bank of Canada's earnings increased by approximately 8.10% per year on average.
Lastly, the company's 5-year EBITDA growth rate of 7.80% suggests a solid growth outlook.
Conclusion
In conclusion, Royal Bank of Canada's consistent dividend payments, robust dividend growth rate, reasonable payout ratio, fair profitability, and solid growth metrics make it an attractive option for dividend-focused investors. However, investors should always consider the overall financial health and growth prospects of the company before making investment decisions.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
