Canadian investors might be looking at bank stocks right now and feeling a bit queasy. I wouldn’t blame you. Many American banks fell into oblivion after two shuttered their doors in the last week. However, when it comes to Canadian banks like Royal Bank (TSX:RY), the situation is different.
In fact, now is a great time to consider buying RBC stock given recent performance. Sure, shares dropped by about 5.5% from the recent news. Even so, shares are down just 1% in the last year alone. That’s compared to other Big Six banks that have fallen deep into the double digits.
But let’s shift out focus from what’s going on right now. Instead, Canadian investors should think big. Think long term. And think value. In that respect, you can certainly see why RBC stock is a great buy today.
Biggest of the Big Six
A great reason to consider RBC stock is that it’s the biggest of the Big Six banks by market capitalization. It currently boasts a market cap at $182.94 billion, which has remained quite strong, even during this economic downturn.
Now, that’s not to say that the bank is perfect. After all, during recent earnings RBC stock reported net income at $3.2 billion, which was down 22% in the last year alone. Diluted earnings per share (EPS) were also down by 19%, though net income was up 4% to $4.3 billion.
The biggest help? The company’s personal and commercial banking, capital markets, and wealth management streams. This helped to offset the lower results from its insurance branch. It’s here where investors may want to focus their attention, as RBC stock has been in these lucrative sectors for years. And it’s why analysts believe there could be a deal to be had for RBC investors.
Optimism reigns supreme
If you’re looking for a long-term hold, RBC stock may be the way to go. It has a worldwide view when it comes to its investments, entering emerging markets not just in set up, but through its wealth management and capital markets. This provides an incredible revenue stream. Further, its Canadian banking business continues to see returns on equity above 30%, and analysts believe that should continue for the foreseeable future.
But the company hasn’t remained stagnant. It’s now expanding in the United States with a focus on high-net-worth and commercial banking, and this will create even more substantial revenue income in the future.
Given the stable present and upcoming future, right now looks like a steal for investors. RBC stock trades at just 12.74 times earnings, offering a dividend yield at 3.9% as of writing. And long-term investors have been handsomely rewarded. In the last decade alone, shares are up 126%! That’s a compound annual growth rate (CAGR) of 12%!
Bottom line
Long-term investors shouldn’t fear this drop, they should celebrate it! The market trends upwards over time, especially for stable companies like RBC stock. Given that it remains the biggest of the Big Six banks, offers a strong dividend, and continue to expand in lucrative fields, it’s absolutely a stock I would consider. In another decade, you could be looking at funds that have quadrupled in that time as well.
