Royal Bank of Canada (TSX:RY)(NYSE:RY), Canada’s largest bank, announced its fourth-quarter earnings results Wednesday morning, and its stock responded by rising about 1% as of 2:00 P.M. EST. Let’s break down the earnings results and the fundamentals of its stock to determine if it could continue higher from here, and if we should be long-term buyers today.
The results that sent the stock higher
Here’s a quick breakdown of 12 of the most notable financial statistics from RBC’s three-month period ended October 31, 2017, compared with the same period in 2016:
|Metric||Q4 2017||Q4 2016||Change|
|Non-interest income||$6,162 million||$5,177 million||19.0%|
|Net interest income||$4,361 million||$4,187 million||4.2%|
|Total revenue||$10,523 million||$9,364 million||12.4%|
|Net income||$2,837 million||$2,543 million||11.6%|
|Diluted earnings per share (EPS)||$1.88||$1.65||13.9%|
|Total assets||$1,212,853 million||$1,180,258 million||2.8%|
|Total deposits||$789,635 million||$757,589 million||4.2%|
|Total loans, net of allowance for loan losses||$542,617 million||$521,604 million||4.0%|
|Common equity||$67,416 million||$64,304 million||4.8%|
|Total assets under management||$639,900 million||$586,300 million||9.1%|
|Total assets under administration||$5,473,300 million||$5,058,900 million||8.2%|
|Book value per share||$46.41||$43.32||7.1%|
What should you do now?
It was a great quarter overall for RBC, and it capped off a very strong year for the company, in which its total revenue increased 4.8% to $40.67 billion, and its EPS increased 11.5% to $7.56 compared with fiscal 2016. That being said, I think the pop in its stock is warranted, and I think it still represents a very attractive long-term investment opportunity for two fundamental reasons.
First, it’s attractively valued. RBC’s stock still trades at just 13.4 times fiscal 2017’s EPS of $7.56 and only 12.7 times fiscal 2018’s estimated EPS of $7.96, both of which are inexpensive given its current earnings-growth rate and its estimated 7.5% long-term earnings-growth rate; these multiples are also inexpensive given the low-risk nature of its business model.
Second, it’s a dividend aristocrat. RBC pays a quarterly dividend of $0.91 per share, representing $3.64 per share annually, which gives it a lavish 3.6% yield. Foolish investors must also note that 2017 marks the seventh consecutive year in which it has raised its annual dividend payment, and its 4.6% hike in August has it on track for fiscal 2018 to mark the eighth consecutive year with an increase.
RBC’s stock is up over 10% since it reported its third-quarter earnings results on August 23, and I think it is still a strong buy today, so take a closer look and consider making it a long-term core holding.