Royal Bank of Canada: A Stock to Buy Today and Forget About for Decades?

Canadian buy-and-hold investors are always searching for top names to add to their portfolios.

Let’s take a look at Royal Bank of Canada (TSX:RY)(NYSE:RY) to see if it deserves to be a top pick today.


Royal Bank just reported fiscal 2016 net income of $10.5 billion. Yes, you read it right, that’s TEN BILLION!

This a staggering sum for many people to comprehend, but it shows the strength of the company’s operations amid a challenging economic environment.

Much of the success can be attributed to Royal Bank’s balanced revenue stream. The company gets the largest part of its earnings from the Canadian personal and commercial banking segment, but Royal Bank also has strong wealth management, capital markets, and insurance businesses that contribute to the mix.

When one group has a tough quarter, the others often pick up the slack. For example, capital markets net income, which tends to be more volatile than the other segments, fell 13% year over year in fiscal Q4, but the wealth management segment saw net income jump 20% on a comparable basis.


Going forward, investors should see the U.S. play a larger role in the company’s earnings reports.

Royal Bank sees strong opportunities south of the border and spent US$5 billion last year to acquire City National, a California-based private and commercial bank targeting high-net-worth clients.

The purchase gives Royal Bank a strong platform to expand its operation in the segment, and investors could see more deals in the coming years.

City National is already making strong contributions to the wealth management group’s results, adding $89 million in Q4 net income.


Royal Bank has a strong history of dividend growth, and the payout should be very safe, even if the bank hits a rough patch.

The current quarterly distribution of $0.83 per share yields 3.7%.


Some investors are concerned the Canadian banks could take a hit if house prices collapse. A huge decline over a short period of time would certainly be negative for the company, but things would have to get pretty bad.


Royal Bank finished Q4 with $283 billion in Canadian residential mortgages on the books. The loan-to-value ratio on the portfolio is 54%, and 47% of the mortgages are insured.

This means house prices would have to fall off a cliff for before the bank takes a material hit.

Should you own this stock?

Royal Bank is a solid buy-and-hold stock for any portfolio, and investors who already own the shares should simply sit back and enjoy the ride.

New buyers, however, might want to wait for a pullback before taking the plunge. The stock has enjoyed a big rally this year, and the latest surge could be followed by some near-term profit taking.

Stock Buy Alert Hits Astounding 96% Success Rate!

The hand-picked investing team inside Stock Advisor Canada, recently issued a buy alert for one special type of “bread-and-butter” stock where The Motley Fool U.S. has banked profits on 23 out of 24 recommendations. Frankly, with an astounding 96% success rate that has delivered average returns of 260%, chances are this new pick could deliver life-changing returns as well. Because the team at Stock Advisor Canada fully embraces the same time-tested investing philosophies that have led to countless Motley Fool winners globally. So simply click here to unlock the full details behind this new recommendation and join Stock Advisor Canada.

*96% accuracy includes restaurant stock recommendations from Motley Fool U.S. services Stock Advisor, Rule Breakers, Hidden Gems, Income Investor and Inside Value since each services inception. Returns as of 5/27/16.

Fool contributor Andrew Walker has no position in any stocks mentioned.

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.