It’s been a tough year for investors to buy stocks. As some top companies traded close to a record high, the macroeconomic environment began to deteriorate due to the escalating trade war between the U.S. and China.
That situation still remains unresolved, prompting many analysts to forecast a recession in the next few months. Of course, these doomsday predictions could prove wrong, but if you’re a long-term investor who’s aiming to make enough return to beat inflation, then it’s advisable to avoid high-growth stocks in this environment and instead focus on dividend-paying stocks.
Here is a top name that I believe can withstand a possible recession much better than many of its peers.
Royal Bank of Canada
Canadian banks have been a trusted source for earning a steadily growing stream of income. They are among the top dividend stocks in North America, benefiting from their balance sheet strength and their careful lending practices.
If you want to take exposure to this area, then buying the shares of Royal Bank of Canada (TSX: RY)(NYSE: RY) isn’t a bad idea. RBC is Canada’s largest lender with a robust presence in the U.S.
During the past five years, its stock has gained 21%, including dividends, far outpacing the benchmark S&P/TSX Composite Index, which grew only 4% during this period.
In its latest quarterly earnings reported last week, the Toronto-based bank said its net income rose 5% for the period ended July 31, from a year earlier to $3.26 billion, or $2.22 a share.
RBC is one of Canada’s most diversified banks, including worldwide operations in asset management and capital markets and ownership of Los Angeles-based commercial and private lender City National Bank. That diversification has been a major plus for RBC to provide stability to its income at a time when other small and localized banks suffer.
In the recent earnings, RBC’s Canadian division posted an 8% jump in income to a record $1.61 billion, representing almost half of overall profit at the bank. Wealth-management earnings rose 11% to $639 million.
For income investors, one or two quarters’ performance doesn’t matter much. They want to buy top dividend stocks that can continue paying steadily growing income and generate returns that consistently beat the markets over the long run.
Royal Bank is one of the top dividend payers that has been growing payouts regularly. The lender has paid distributions to shareholders every year since 1870 with a strong track record of dividend growth. Last week, RBC hiked its payout again, its second upward revision this year. The Canadian bank boosted its quarterly payout by about 3% to $1.05 a share.
Bottom line
Trading at $97.96, RBC stock is a solid bet for long-term investors. The stock currently yields 4.1% and offers a good entry point to earn steadily growing income in these uncertain times.
Stocks like RBC are unlikely to provide you a double-digit growth each year, but they are the slow-moving dividend stocks that will keep sending you dividend cheques quarter after quarter.
