Royal Bank of Canada Stock: Buy, Sell, or Hold?

RBC stock (TSX:RBC) has seen shares climb 22% since bottoming out, while offering a 4.18% dividend. But what about future growth?

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Canadian bank stocks saw a bit of positivity mixed with uncertainty about the future outlook this year. And Royal Bank of Canada (TSX:RY) was no exception. RBC stock saw shares pretty much remain stable after earnings, while other banks dipped. But are investors in for a drop at these higher levels?

Let’s take a look at whether RBC stock should be considered a buy, sell, or hold on the TSX today.


If you’re considering buying RBC stock, there are certainly many reasons, especially if you look historically. The company has a steady dividend stream and reliable yield, which is currently around 4.18% as of writing. It also trades at just 12.3 times earnings, which is lower than most other banks.

RBC stock is also known for its long-term stability. As one of the Canadian Big Six Banks, it benefits from a strong financial position and well-established reputation. It would even be considered big if it were in the United States! This strength can be appealing for investors seeking stability and lower risk for their portfolios, especially during these periods of uncertainty.

And what’s more, there are a lot of reasons for future growth. This includes the recent acquisition of HSBC Canada. This should bring in more cash flow from integration, including from high-income newcomers to Canada. And once the Canadian economy strengthens once more, there will be even more reasons for RBC to expand into new ventures and markets.


Yet there are some reasons why investors may want to consider stepping onto the sidelines with this stock. RBC stock underperformed the broader market in recent years, including the TSX 60. Rising interest rates have also put pressure on the stock, even though they can benefit banks by increasing their profit margins on loans.

While that’s the case, rate hikes can also impact the stock price as higher rates make it hard to invest yet more attractive to get into bonds. Furthermore, there is lower growth potential for RBC stock. This is because of RBC’s large market size and saturation compared to peers. So this limits it ability to expand rapidly.

Then there are valuation concerns. Even while the stock looks fairly valued, others might argue it’s not cheap enough yet to justify future growth. And without that strong growth, it could mean lower growth in dividends as well.


All this considered, there are a lot of “ifs.” The company could be a buy if the market recovers and it remains valuable. It could also be a sell if it doesn’t manage to achieve the growth hoped for with the HSBC acquisition.

While those might be some strong “ifs,” there is one stellar reason to consider the stock on the TSX today, and that’s the dividend and continued stock stability. RBC stock is now down 3% in the last year, but up 22% since bottoming out in October. Certainly we could see another drop, but it’s less and less likely – especially once interest rates come down.

Meanwhile, you can lock up a dividend yield currently at that 4.18% as mentioned. So you can achieve passive income, sustainable returns, and a strong long-term buy. So at the very least, keep holding RBC stock for more growth and a strong dividend.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has positions in the Royal Bank of Canada. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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