When it comes to investing, many of us may have heard the phrase “go big or go home.” In the case of Royal Bank of Canada (TSX:RY), that theory holds true. RBC stock has long been a solid investment and maintains the top spot as the largest stock by market cap.
But it goes beyond its size when it comes to growth and passive income. So, let’s look at why RBC stock continues to be a top choice for investors now and for decades to come.
Still strong
RBC has demonstrated consistent financial strength, as evidenced by its recent earnings reports. In the second quarter (Q2) of 2024, the bank reported a net income of $4.0 billion, up 7% year over year. The adjusted net income also saw an 11% increase to $4.2 billion. Additionally, diluted earnings per share (EPS) were $2.74, reflecting a 5% growth from the previous year, with an adjusted diluted EPS of $2.92, marking a 9% rise.
Furthermore, RBC has a solid history of dividend payouts, making it a reliable choice for income-focused investors. The bank recently declared an increase in its quarterly common share dividend by four cents to $1.42 per share, payable on August 23, 2024.
Right now, its dividend stands at a lofty 3.78%. And that’s all while the company’s seen its shares rise by 17% in the last year alone! This consistent dividend and share growth highlights RBC’s commitment to returning value to its shareholders.
More to come
Now, it’s all well and good to see the consistency in returns and dividends. But investors want more. And that’s on the way. RBC’s strategic acquisition of HSBC Bank Canada in March 2024 is expected to further strengthen its market position. While this acquisition initially impacted net income due to integration costs, it positions RBC for greater market reach and service expansion.
What’s more, RBC maintains a robust capital position with a common equity tier-one (CET1) ratio of 12.8%, well above regulatory requirements. This strong capital buffer provides confidence in RBC’s ability to withstand economic uncertainties and continue its growth trajectory.
Finally, RBC’s diversified income streams across Personal & Commercial Banking, Wealth Management, Insurance, Investor & Treasury Services, and Capital Markets ensure a balanced revenue mix. The bank reported strong performance across most of these segments, with record earnings in Capital Markets and significant contributions from Wealth Management and Insurance.
And yet, RBC’s current price-to-earnings (P/E) ratio stands at 13.87, indicating an attractive valuation relative to its earnings growth. Analysts project RBC’s earnings to grow by approximately 9.09% in the coming year, reflecting confidence in its ongoing growth potential.
Bottom line
With its strong financial performance, reliable dividend growth, strategic acquisitions, robust capital position, and diversified income streams, RBC stock is well-positioned as a rock-solid investment on the TSX. For investors seeking a blend of stable dividends and growth potential, RBC continues to be a compelling choice.
By considering these factors, it’s clear why RBC remains a top pick for both income-focused and growth-oriented investors.