Dividend stocks tend to be a favourite of specific investors. Those with a penchant for high-quality businesses that churn out consistent profits and provide meaningful long-term growth often search for top-tier dividend stocks. In addition to being recession-resistant, they add great diversity to your portfolio, mitigating risks in times of uncertainty.
The Canadian stock market has quite some prominent names when it comes to dividend stocks. One such name is Royal Bank of Canada (TSX:RY).
Let’s dive into whether the largest company in Canada by market capitalization is the king of dividend stocks or if this is simply a company worth investing in due to its size and profitability profile.
Is this blue-chip stock worth buying in October?
Canada’s largest financial institution, Royal Bank, boasts a market capitalization of $165 billion, placing it among the world’s top 10 largest banks. The acquisition of HSBC Canada, currently valued at $13.5 billion, has cleared a major hurdle owing to Competition Authority approval. This deal will further cement the company’s economies of scale and relative importance on the global scale.
Royal Bank remains among the most profitable Canadian banks, which hasn’t been reflected in its near-term performance. Since February, this stock has declined from around $140 per share to less than $115 per share. That said, this sector-wide weakness could be viewed as a buying opportunity for long-term investors, looking to pick up a historically high dividend yield of 4.6% for this stock.
How was the Royal Bank’s performance in Q3?
Royal Bank of Canada reported third-qaurter (Q3) 2023 net income of $3.9 billion, up 8% from a year earlier. Diluted earnings per share (EPS) rose to $2.73, up 9% over the same period. Adjusted net income and EPS were $4.0 billion and $2.84, respectively, up 11% from the prior year.
These results were driven by higher returns in capital markets, particularly in corporate and investment banking and global markets. Increased net interest income from higher interest rates and growth in Canadian banking also contributed to the increase.
Despite higher loan loss provisions, the bank’s capital position remained strong, with a common equity tier-one ratio of 14.1%, supporting strong volume growth and common stock dividends of $1.9 billion, along with a robust average LCR of 134%.
Bottom line
As you can see, Royal Bank has a long-standing history of quality dividend payments. Long-term investors have benefited significantly from their investment in this blue-chip stock. Hence, if you have similar investment goals and appetite, this stock is a must-have in your portfolio.
