The Canadian bank stocks haven’t really been shining all too bright for most Canadian investors. Indeed, during good times, banks tend to be a great source of capital gains and passive income. Their dividends are not just generous, but they tend to grow at a generous annual rate! In a way, long-term investors stand to be spoiled, especially when times are good.
In recent years, times haven’t been too great. Though the bank stocks haven’t imploded as they did during the 2008 Great Financial Crisis (and stock market crash), they have really struggled to become a worthwhile investment for most. Indeed, some banks have managed to do better than others. Royal Bank of Canada (TSX:RY) — the king of Canada’s top banks — is one of the better performers that could continue to outpace rivals as we head into another year that’s sure to be challenging but full of surprises (both positive and negative).
Without further ado, let’s have a look at Royal Bank of Canada (not to be confused with Canada’s central bank, the Bank of Canada) and see how the risk/reward scenario is looking for 2024 and the next three years.
Royal Bank of Canada stock: Is now a decent time to buy?
Royal Bank of Canada has endured a rough ride in 2023. Just when things seemed like they could get no better, the stock skyrocketed around 25% from its October 2023 trough to its eventual January 2024 peak. Now, shares have since come in by a bit, but the explosive move higher is notable and perhaps the start of something even more pronounced.
Could investors be in for a special recovery toward new heights this year as the firm integrates HSBC’s Canadian assets? Possibly. I’m a big fan of the deal and think Royal Bank is starting to become head and shoulders above its peers in the Big Six cohort.
The HSBC deal makes a profoundly strong bank that much stronger. The $13.5 billion deal did not come cheap, in my opinion. But it’s one that could help the banking heavyweight pay even juicier dividends at some point down the road!
All considered, I think now is a great time to be a net buyer of the stock. Shares of RY trade at 12.61 times trailing price to earnings (P/E), with a 4.18% dividend yield. Is it the cheapest of the peer group? It is not based on traditional valuation metrics like the P/E.
You can get cheaper plays and lower yields with Royal Bank’s peers. But if you value quality and steady appreciation over time, I think RY stock still stands out as a potentially better bet. All hail the king of Canada’s banking scene!
The Foolish bottom line on RY stock
HSBC is shaping up to be a big deal for Royal Bank, as it looks to climb back after last year’s turbulent trading. Of all the banks that could lead the pack, I think the $186.3 billion Royal Bank is the one to do it. In 2024, I expect a good chance that shares could gain, perhaps toward all-time highs.
