It’s a really hard time for investors. There is such a mix of opportunity and fear that’s keeping Canadians from making a lot of cash, but I totally get it. You need that cash available in many cases, which is keeping you from making some smart investing decisions.
One smart decision could be Royal Bank of Canada (TSX:RY). Today, I’m going to show you why and why, if you have even a small amount to invest, it could be worth it.
Looking at the past
There’s a reason we’re starting out with 2012. During the global financial crisis, banks around the world fell dramatically. This included Canadian banks, despite none of them actually going under. Even so, on average all the Canadian Big Six banks ended up seeing shares drop by about 40%.
This included Royal Bank stock. The bank fell starting in May 2007, dropping lower and lower until hitting rock bottom by February 2009. This is when things started to turn around. Even so, it wouldn’t be until 2010 that shares hit pre-drop prices.
Why aren’t we looking at 2010? We aren’t because another drop came down on Royal Bank stock. Between April 2010 and November 2011, shares dropped by 28% — a drastic drop that caused concern.
However, since then, shares have overall done quite well until recently. By 2012, there was a solid upward trend and since then, shares are up 135% in that time! That would mean a $2,500 investment in January 2012 would be worth about $5,900 today.
Could it happen again?
I’m not going to say that this couldn’t happen again. Anything is possible. But Royal Bank stock isn’t likely to drop 40% overnight suddenly. The subprime mortgage crisis and the financial fallout that hit the world was, we hope, a one-off. It was a huge downturn that was the largest since the Great Depression — hence, the name, the Great Recession.
Even so, investors shouldn’t be waiting around for huge drops like this to get in on a stock. In fact, there are many reasons to consider Royal Bank stock today.
First off, it might just be one of the safest investments you could make among banking stocks. The company saw earnings drop, as did the rest of the Big Six banks, but managed to stay afloat thanks to provisions for loan losses. However, it remains the top choice for wealth and commercial management, as well as capital markets.
These lucrative revenue streams continue to provide Royal Bank stock with the support it needs to continue growth. Even during this downturn. Now, shares are down 7% in the last year and 3% year to date. This mainly occurred after earnings came out that fell below estimates.
Shares are down even further from all-time highs — down about 16% from that point. Again, that’s nowhere near the 28% or 40% drops we’ve seen before. But it’s still a great deal!
Bottom line
Don’t wait around for shares of Royal Bank stock to bottom out if you want growth. This company has proven over the years that it can weather the worst storms, making it a solid buy no matter what’s going on. And while it trades at 12.13 times earnings, with a dividend yield at 4.37%, it’s a solid stock to pick up today.
