This week, markets are crashing worldwide on fears that the coronavirus spread will wreak havoc on the economy. Over the course of just two days, the S&P 500 slipped 6.3%, while the TSX took a smaller, but still substantial, dip.
While there’s no doubt that investors have legitimate concerns, the latest market selloff has only made certain stocks more attractive. In this article, I’ll explore one 4.1% yield dividend stock that just recently increased its payout after posting solid Q1 earnings — despite all the headwinds in the broader economy.
Royal Bank of Canada (TSX:RY)(NYSE:RY) is Canada’s largest bank. With a huge Canadian retail banking business and major wealth management operations in the U.S. and the Caribbean, it’s a truly global financial institution. Over the years, RY has delivered slow and steady but unambiguously positive results to investors, driven by strength in its wealth management business.
Although Royal Bank’s retail banking operations are highly domestic focused, and therefore exposed to consumer credit weakness, its wealth management operations are another story.
Royal Bank’s wealth management business is highly international. In 2019, it grew 12.6% year over year, while personal and commercial banking grew at just 6.2%. This indicates that RBC’s international operations are paying off, offsetting the risk from exposure to domestic consumer credit.
A solid quarter
In its most recent quarter, Royal Bank reported solid results, with net income up 11% from the prior year. That’s an excellent growth figure for a mature Canadian bank. Interestingly enough, in the recent quarter, growth was actually driven mostly by capital markets and personal and commercial banking; wealth management took a dip in the quarter. This is a break from historical norms, which have seen wealth management as RBC’s principal growth driver.
Dividend income on the rise
As a result of its solid Q1 earnings, Royal Bank hiked its common share dividend by $0.03 a share, bringing the payout to $1.08. That’s not a massive percentage increase, but Royal Bank was already a high yielder before the dividend was declared, with a yield of approximately 4%. Now, Royal Bank yields about 4.1%, and that yield could go higher in the future.
Over the years, RBC has proven itself to be a paragon of financial stability, growing slowly but surely year after year. In its most recent quarter, the bank delivered above-average growth and increased its dividend to common shareholders — a major vote of confidence from management.
This week, markets have been getting hammered, thanks to coronavirus fears and concerns over ongoing rail blockades. However, as we saw from RBC, that doesn’t mean individual stocks can’t be great buys. In the midst of global market panic, the bank is posting record earnings and increasing its dividend. The company’s stock would be a great one to consider for any long-term, dividend-growth-oriented portfolio.
Renowned Canadian investor Iain Butler just named 10 stocks for Canadians to buy TODAY. So if you’re tired of reading about other people getting rich in the stock market, this might be a good day for you.
Because Motley Fool Canada is offering a full 65% off the list price of their top stock-picking service, plus a complete membership fee back guarantee on what you pay for the service. Simply click here to discover how you can take advantage of this.
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 Button has no position in any of the stocks mentioned.