If you want to be a super-lazy investor, opt for a Big Six bank. However, if you are willing to be a peak-lazy investor, go for the top Canadian bank — that is, Royal Bank of Canada (TSX:RY)(NYSE:RY).
This Canadian bank remains the largest of its peers in terms of market capitalization. And while recently dethroned by Shopify, Royal Bank remains a top holding of many investors either directly or via index funds. This bank has proven to be a great long-term dividend play as well as total-return stock for investors. Not much has changed in this regard.
Here’s why investors would be remiss to ignore this steady core portfolio holding.
Profits surging for this top Canadian bank
As with any large Canadian bank, most investors are focused on these companies’ bottom lines. That’s because higher profitability means more dividend income and higher valuations over time.
Indeed, Royal Bank isn’t able to raise its dividend yet. However, it’s expected that when regulators allow for dividend hikes, Royal Bank will be a key participant in returning value to shareholders directly.
That’s because Royal Bank’s recent profit surge beat expectations. The company reported its fiscal third quarter at the end of July. As per the company’s report, net income shot up 34% year over year. The company brought in $3.00 per share in adjusted earnings compared to analyst estimates of $2.72. That’s a massive beat.
The company attributes this success to disciplined cost management and strong diversified revenues across various business segments. Indeed, Royal Bank’s core personal and commercial banking unit posted a surge of 55% in profitability.
This profitability boost has also boosted Royal Bank’s common equity tier one ratio to 13.6%. Last quarter, this ratio was at 12.8%.
Accordingly, Royal Bank’s financials haven’t looked this good in some time. The company’s outlook and prospects remain strong. Indeed, from a balance sheet perspective, there’s a lot to like about where this bank stands right now.
Royal Bank is one Canadian bank that has been an excellent pandemic recovery play. The fact is, we’re still battling the pandemic. Accordingly, investors looking for companies with more upside in what will eventually be the “new normal” have a lot to like with this stock.
I think Royal Bank’s quarterly performance this past year speaks volumes about how sturdy a long-term holding this stock is. Indeed, long-term investors who have simply held through the turmoil of various crashes (and preferably bought the dips) have done very well.
Royal Bank is a long-term core portfolio holding that ought to be treated as such. Accordingly, this is one Canadian bank I think should be on every investor’s watch list right now.
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 Chris MacDonald has no position in any stocks mentioned in this article. The Motley Fool owns shares of and recommends Shopify. The Motley Fool recommends the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify.