The S&P/TSX Composite Index shed 167 points on Wednesday, May 31. This was the second straight triple-digit point loss for the TSX index this week. Some of the worst-performing sectors included battery metals, base metals, and energy. Canada’s heavily weighted S&P/TSX Capped Financial Index sector also finished the day down roughly 1%.
Today, I want to look at two of the top financial equities to kick off the month of June. Royal Bank (TSX:RY) is the largest Canadian bank and the biggest TSX stock by overall market cap, while Suncor Energy (TSX:SU) is a top integrated energy company in Canada and around the world. Which stock is the better buy to start the month of June? Let’s find out!
How does Royal Bank look after its recent earnings report?
Royal Bank and its peers released their second batch of bank earnings in late May 2023. Rising interest rates have made the macroeconomic environment tougher for these titanic lenders, at least when it comes to growing their loan book. Shares of Royal Bank have dropped 9.6% month over month as of close on May 31. That has pushed the stock into negative territory so far in 2023. Its shares are down 8.3% year over year.
Canada’s number one bank released its second-quarter (Q2) fiscal 2023 earnings on May 25. Royal Bank reported adjusted net income of $3.8 billion, or $2.65 adjusted diluted earnings per share (EPS) — down 13%, or 11% compared to Q2 fiscal 2022. Like its peers, this bank took a hit due to a dramatic increase in provisions set aside for bad loans.
This bank’s Personal and Commercial Banking segment reported net income of $1.91 billion, which was down 14% compared to the previous year. Moreover, its Wealth Management segment saw net income drop 8% year over year. Royal Bank’s Capital Markets segment achieved net income growth of 10% to $939 million.
Here’s why I’m looking to another dividend stock today
Suncor Energy stock has plunged 8.9% month over month as of close on May 31. That has pushed this energy stock into negative territory in the year-to-date period. Its shares have plunged 26% year over year. Canadians who want to see more can play with the interactive price chart below.
In Q1 fiscal 2023, Suncor generated adjusted funds from operations (AFFO) of $3.00 billion — down from $4.09 billion in the previous year. Moreover, adjusted operating earnings fell to $1.80 billion, or $1.39 per common share. That was down sharply from $2.75 billion, or $1.92 per common share, in the prior year. In Q1 2022, total upstream production fell to 742,100 barrels of oil equivalent per day (boe/d) compared to 766,100 in Q1 of fiscal 2022.
Looking ahead, Suncor’s management has emphasized the importance of squeezing as much value as possible out of each asset in this economic climate.
The case for Suncor Energy in the second half of 2023
Shares of Royal Bank currently possess a favourable price-to-earnings (P/E) ratio of 11. Moreover, this bank stock offers a quarterly dividend of $1.35 per share. That represents a solid 4.4% yield. Meanwhile, Suncor Energy last had a very attractive P/E ratio of 6.3. This energy stock offers quarterly distribution of $0.52 per share, which represents a strong 5.4% yield.
Suncor Energy currently offers superior value and a rock dividend. I’m going with the super energy stock in the beginning of June 2023.