Could Royal Bank Stock Help You Retire a Millionaire?

Let’s dive into whether Royal Bank stock could be the best way for investors to retire millionaires, given its historical performance.

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Retiring as a millionaire is everyone’s dream, isn’t it? However, due to inflation, it seems more like a necessity than a dream. Interest rates and inflation have affected Canadians, making it difficult to save and afford a comfortable life post-retirement. That’s where looking at top Canadian stocks such as Royal Bank of Canada (TSX:RY) comes into play.

Royal Bank remains the most valuable company in Canada, and for good reason. The leading Canadian bank and one of the top banks in the world, Royal Bank provides investors with some of the most stable options to consider in the banking sector.

Let’s dive into whether this stock is the best option for long-term investors looking to retire a millionaire.

A well-positioned behemoth

Royal Bank’s massive size is worth noting. The company’s market capitalization of nearly $200 billion dwarfs rivals, with a nearly $60 billion lead over Canada’s second-largest company, Toronto-Dominion Bank (TSX:TD).

Size is certainly important, as it insulates Royal Bank from volatility and provides investors with a stable portfolio anchor to buy and hold onto long-term. However, the company’s diversified operations, which span a number of important business segments, is what I like most about this bank. Investors not only gain global exposure to the company’s wealth management services and capital markets, but also domestic exposure to commercial, corporate, and retail banking. In other words, Royal Bank is a Canadian stock that’s well-diversified geographically and by business line, to an extent its peers aren’t.

Royal Bank of Canada has 150 years of rich history, serving approximately 17 million clients and operating predominantly in Canada with additional operations in the United States and other nations. 

Impressive quarterly results signal strength ahead

Royal Bank’s historical track record is backed by some strong fundamentals. This past quarter, the Big Six bank recorded net income growth of 12%, outpacing most of its rivals. Additionally, the lender’s return on equity came in at 13.1%, leading to impressive earnings per share of $2.50 for the quarter. Adjusted net income and earnings per share came in even higher.

With a dividend yield of 4%, investors benefit not only from Royal Bank’s growth prospects, but its capital return program as well. In addition to the company’s impressive yield, investors also benefit from stock buybacks over time. This makes the stock a no-brainer, in my view, for those looking to build a million-dollar portfolio over time.

Why is Royal Bank a buy?

Royal Bank’s recent acquisition of HSBC Canada has been completed, furthering the company’s moat in the oligopoly that is Canada’s banking sector. As Royal Bank continues to grow and expand its footprint internationally, its status as a “too big to fail” bank continues to be bolstered.

It’s my view that Royal Bank has what it takes to weather any economic cycle ahead. With a solid dividend yield and growth profile that makes this bank an outperformer relative to its peers, it’s a top holding investors may want to consider at current levels.

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 Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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