3 Reasons to Buy Royal Bank of Canada (TSX:RY) Stock Ahead of Earnings

Royal Bank of Canada (TSX:RY)(NYSE:RY) stock is hovering near 52-week lows and is worth consideration ahead of its fourth-quarter earnings release on November 28.

| More on:
Bank sign on traditional europe building facade

Image source: Getty Images

Royal Bank of Canada (TSX:RY)(NYSE:RY) stock had dropped 6.8% in 2018 as of close on November 15. Shares were also down 4% year over year. Heading into November, Royal Bank stock had just passed through a 52-week low.

Canadian financials have been pummeled since late September, but the final round of bank earnings is on tap in late November and early December. Royal Bank remains an enticing target before its fourth-quarter earnings release. In this article we will explore three reasons why investors should consider adding Royal Bank stock before the key date.

Volatility is generating discounts

Canadian bank stocks have not been spared from the global stock market sell-off that has extended from late September into the middle of November. Royal Bank stock was down 5.7% over a three-month span as late September put a halt to a steady climb that began in the middle of April. Earlier this month I’d discussed why Canadian banks were attractive at this point.

Investors will have missed out on the chance to add Royal Bank at its 52-week low of $93.13, which it reached in the final days of October. The stock quickly climbed out of oversold territory, and its Relative Strength Index (RSI) sat just below 40 as of close on November 15. The chance to buy at such a low price has likely passed, but a strong Q4 has the potential to propel Royal Bank much higher.

Royal Bank set to cap off a solid FY2018

The bank is set to release its fourth-quarter and full-year results before markets open on November 28. Royal Bank earnings have been very solid in 2018 so far.

For the first nine months of 2018, Royal Bank has reported net income of $9.18 billion, which is up 6% from the same period in the prior year. Excluding the proceeds from the sale of Monerus in Q1 2017, net income has climbed 9% year over year, while diluted earnings per share is up 11% on an adjusted basis.

Like its peers, Royal Bank’s retail banking has been bolstered by improved margins from higher rates and solid volume growth. Its Wealth Management and Capital Markets segments have also turned in a good performance year to date.

Income to feast on in a choppy market

Market turbulence has driven many investors to re-evaluate their portfolios in the final weeks of 2018. For those who want to swap out growth stocks for income, Royal Bank is still a very good option. Royal Bank last announced an increase to its quarterly dividend of 4% to $0.98 per share, representing a 3.9% yield.

Royal Bank has delivered eight consecutive years of dividend growth. Its discounted price puts its yield into good company, which is another notch for the stock ahead of its earnings release. For those seeking growth, Royal Bank offers a nice balance in volatile periods.

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 Ambrose O'Callaghan has no position in any of the stocks mentioned.

More on Bank Stocks

A close up image of Canadian $20 Dollar bills
Bank Stocks

1 Top Bank Stock for Investors Looking to Boost Their Passive Income in 2022

The goal to growing one’s passive income over time is a noble one. For those entering retirement or nearing those …

Read more »

stocks rising
Bank Stocks

Big 6 Bank Stocks Could Soar With Interest Rate Hikes

After the last year’s dividend bonanza, significant capital gains could be next for Big 6 Bank stock investors in 2022. …

Read more »

Technology
Bank Stocks

My Best Value Pick to Buy Amid the Market Plunge

Market plunges can be scary, especially if we’ve gone without one for quite some time. Many beginners have likely never …

Read more »

money while you sleep
Dividend Stocks

Value vs. Return Potential: 3 Stocks for the Right Balance

Getting the most “bang for your buck” is a healthy approach to spending and investing. For investing, it’s tied to …

Read more »

Stand out from the crowd
Bank Stocks

My Top Canadian Bank Stock to Buy for Dividend Growth

One of the Big Five banks, Bank of Nova Scotia (TSX:BNS)(NYSE:BNS), is a top choice for TSX investors due to its reliable …

Read more »

edit Four girl friends withdrawing money from credit card at ATM
Bank Stocks

2 Top Canadian Bank Stocks to Buy Right Now

For those looking to invest like Warren Buffett or other top-tier value investors, bank stocks are a great way to …

Read more »

consider the options
Bank Stocks

Interest Rate 2022: 8 Hikes Needed to Cool Inflation

The guessing game is on regarding the timing of the first interest rate hike by the Bank of Canada (BoC) …

Read more »

thinking
Bank Stocks

Will TD Bank Stock Keep Outperforming in 2022?

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) delivered a solid performance in 2021. Up 35% for the year, it easily beat the S&P 500, …

Read more »