When it comes to the Big Six Banks, Canadians flock to them for many reasons. There’s the security of banks that haven’t gone through a banking crisis since 1837. There’s the stability from the provisions created for credit losses. Then there’s the dividend, each of them increasing their dividends year after year. But perhaps none are so great as Royal Bank of Canada (TSX:RY).
While not actually a Dividend King, raising its dividend each year for 50 consecutive years, it sure could be considered the King of Dividends in the banking sector. Why? Let’s get into it.
Stability
Royal Bank stock could be considered the most stable of the banks in Canada. This comes in part from being the largest of the Canadian banks, with the most assets as well as the largest market capitalization. The bank has risen to prominence in large part from its investments in the wealth and commercial management sector. This has provided stable income for years, even decades.
Other areas that have seen stable income from the bank include the insurance sector, corporate banking, and capital markets. All have proven to be secure methods of creating income, though some have proven more difficult in the last year or two.
Rising interest rates and inflation have meant less investment and fewer loans. This has meant the bank has had to put aside more provisions for credit losses. That being said, it still remains on top. In fact, Royal Bank beat out earnings estimates most recently as arguably the best performing bank for the latest quarter. Here is where we move to the second reason to consider the stock.
Growth
Royal Bank seems to be able to come back from the ashes quite quickly even during some of the hardest economic times. This occurred recently when Royal Bank announced its most recent earnings report. While net income was down 6% year over year, adjusted net income came up slightly to $16.1 billion as well.
However, the company remained on top of things, increasing their total provisions for credit losses to $2 billion. In fact, despite all this, Royal Bank stock even managed to increase its dividend by $0.03 per share for the next quarter. So with the company’s funds remaining under control, and indeed growing, more growth is set to come in the next year.
This certainly will come from the stock seeing growth in wealth and commercial management, as well as its insurance arm. However, more growth should also come from its investments into emerging markets. Furthermore, it seems inevitable that Royal Bank stock will acquire HSBC, bringing in even more growth for future investors.
Dividends on dividends
Royal Bank stock has a long history of dividend increases, and now is no different. In fact, over the last decade the company’s dividend has grown at a compound annual growth rate (CAGR) of 8.5%! That’s through a pandemic, multiple market dips, crashes, and more. And it has still come out the other side.
So while the other Canadian banks are struggling, look to Royal Bank stock for support and growth. There are multiple reasons for the company to grow even further, but it still trades with enough value to keep today’s investor interested.
Shares are now on par with where they were at the beginning of the year, bouncing back 9% in the last month alone. Yet it trades at 12.7 times earnings as of writing, with a 4.2% dividend yield. So when it comes to dividends, consider Royal Bank stock as the King of Dividends. One you can count on for life.
