Buying stocks that pay consistent and growing dividends is a time-tested way for long-term investors to get the returns they need to stay ahead of inflation and have some extra funds for retirement.
Canada’s largest bank by market capitalization continues to deliver solid results, despite the headwinds facing the Canadian economy. In its Q1 2015 earnings statement, Royal Bank reported record earnings of $2.4 billion, a 17% year-over-year increase.
Royal Bank’s diversified earnings stream is part of the reason the company is doing so well. Canadian personal and commercial banking are still the bread and butter of the company’s revenues and accounted for 51% of earnings in the most recent quarter, but Royal Bank understands that growth opportunities also lie in other areas. In the past few years, management has focused on building strong wealth management and insurance operations, and these are delivering excellent results.
Royal Bank just increased its quarterly dividend by two cents. The annualized payout of $3.08 per share yields about 3.8%. The company has a 10-year dividend-growth rate of nearly 11%.
Royal Bank currently trades at a reasonable 11.4 times forward earnings and 2.2 times book value.
Canada’s fastest-growing communications business puts a lot of emphasis on customer service. This strategy is paying off handsomely, as the company continues to grow both its wireline and wireless customer base across the country.
Telus enjoys the industry’s lowest mobile churn rate and the highest average revenue per user. Apparently, happy customers spend more.
One part of the business that doesn’t get much attention is Telus Health. The division focuses on providing doctors, hospitals, and insurance companies with secure online services to efficiently manage patient data. In the coming years, investors should see this area of the business grow significantly.
Telus also looks after its investors. Since 2004 the company has raised its dividend 15 times and paid shareholders $11 billion in the form of dividends and share buybacks. Over the past 10 years, the annualized dividend-growth rate has averaged about 17%.
The current dividend of $1.60 per share yields about 3.7%. The stock trades at a pricey 15.7 times forward earnings and about 3.5 times book. Sometimes you have to pay up for quality.
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Andrew Walker has no position in any stocks mentioned.