Down 10%, Royal Bank of Canada Stock Is a Steal Today

Royal Bank of Canada (TSX:RY) stock is a top-tier Big Six bank that may be worth the relative premium multiple at these levels.

| More on:
Target. Stand out from the crowd

Image source: Getty Images

It’s been a wild ride for Canada’s big banks, with the failure of Silicon Valley-based SVB Financial casting a large shadow over the broader financial sector. Despite the jolt of jitters on the big banks right now, I continue to stand by the Big Six. Royal Bank of Canada (TSX:RY) is dividend royalty and should be considered anytime it falls by a considerable amount or drags its feet over a span of many quarters.

Royal Bank is a top dog for a very good reason. It’s well capitalized, isolated from the banking woes concentrated on some of the U.S. regional players and sports a wonderful management team who knows how to dodge and weave through hard times. Indeed, Royal Bank is one of those sleep-easy banks, even when the tides get tougher.

Royal Bank: Banking royalty when times get choppy!

You will not get the biggest yield or the lowest price-to-earnings multiple from the name. But what you will get is relative resilience through recessions and other ugly scenarios. Simply put, Royal Bank is always prepared for a rainy day. And even when it gets knocked into the gutter, it doesn’t tend to take too long before shares are back in rally mode.

The company’s stellar risk-management practices are a major reason why Royal Bank is one of the best plays to own when investors are looking to build wealth in environments where prospective returns could be a tad lower than historical averages.

Royal is not just well capitalized, ready to deal with provisions or other unforeseen hiccups, as they come along. The firm has also been steadily investing in digital technology.

Royal Bank’s growth path looks sound

Mobile banking is a big deal, as fintech firms continue to target the lunch of the largest financial institutions on the planet. Over the years, Royal Bank has defended its turf with its impressive mobile app and other digital services. There was a reason why Royal Bank was ranked number one for mobile app customer satisfaction among the Canadian banks. It’s a very well-designed platform that just works.

It’s not just tech that could help Royal Bank keep its throne as Canada’s largest firm (can any firm match the $186 billion market cap?). The firm made an intriguing deal in the domestic market, as it acquired HSBC Canada in a deal worth $13.5 billion cash.

That’s the largest Canadian banking deal on record. I think HSBC Canada is in very good hands with Royal’s managers. Currently, around $740 million in cost savings are expected for 2024. Looking further out, I think the new bank could help spark impressive earnings growth over time.

Of course, many big banks have been wheeling and dealing of late. Most notably, some big Canadian banks have been adding to their exposure in the U.S. regionals. With the plunge in U.S. regionals, it certainly seems like Royal Bank looks wiser than its peers by sticking with the domestic plays.

The bottom line on Royal Bank of Canada stock

HSBC is a deal that could pay huge dividends over the long run, as Royal continues improving its domestic banking arsenal. Today, RY stock goes for 12.7 times trailing price to earnings, with a 3.99% dividend yield. It’s not as cheap as some of its rivals, but I think the premier banking giant is worth a premium price tag.

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 Joey Frenette has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Bank Stocks

sale discount best price
Bank Stocks

There’s a Big Sale on the Big 6 Bank Stocks Right Now

Some Canadian bank stocks are on a bigger sale than others. Which will you buy for income and price appreciation?

Read more »

Bank sign on traditional europe building facade
Bank Stocks

Don’t Avoid Bank Stocks! This 1 Actually Has Massive Long-Term Potential

Some investors have said that it's a good time to avoid bank stocks. Here's one bank you shouldn't avoid. Buy…

Read more »

Dividend Stocks

Turn a $10,000 Investment Into $844 in Cash Every Year

The power of compound interest from regular investments in quality dividend stocks can deliver solid long-term returns and make you…

Read more »

calculate and analyze stock
Bank Stocks

1 Cheap TSX Bank Stock I’d Buy Over Suncor Right Now

Here's one TSX bank stock that is well poised to outpace Suncor Energy in 2023 and beyond. Let's see why…

Read more »

Dice engraved with the words buy and sell
Bank Stocks

1 Bank Stock I’d Buy Today (and 1 I’d Sell)

Bank earnings season is upon us, and I’d look to buy Bank of Nova Scotia (TSX:BNS) while avoiding another top…

Read more »

A worker drinks out of a mug in an office.
Bank Stocks

Royal Bank Stock Pays a 4.37% Dividend Yield, But Another Stock Looks Even Better Today

Royal Bank of Canada (TSX:RY) may be the top dog on the TSX, but I prefer another dividend stock for…

Read more »

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

Big Yield at Low Prices: 2 Bank Stocks for June 2023

Canadian Imperial Bank of Commerce (TSX:CM) stock and another intriguing bank stock are worth a look this June!

Read more »

Make a choice, path to success, sign
Bank Stocks

1 Bank to Invest in and 1 to Sidestep in June 2023

Here's a bank to invest in and one to avoid this month.

Read more »