Yahoo Finance Royal Bank of Canada (TSE:RY) Will Pay A Larger Dividend Than Last Year At CA$1.28
Royal Bank of Canada (TSE:RY) will increase its dividend on the 24th of August to CA$1.28. This takes the annual payment to 3.7% of the current stock price, which is about average for the industry.
View our latest analysis for Royal Bank of Canada
Royal Bank of Canada's Dividend Is Well Covered By Earnings
Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, Royal Bank of Canada's earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.
EPS is set to fall by 0.5% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 44%, which is comfortable for the company to continue in the future.
Royal Bank of Canada Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The first annual payment during the last 10 years was CA$2.16 in 2012, and the most recent fiscal year payment was CA$5.12. This means that it has been growing its distributions at 9.0% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.
Royal Bank of Canada Could Grow Its Dividend
The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see Royal Bank of Canada has been growing its earnings per share at 9.5% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
In Summary
Overall, we always like to see the dividend being raised, but we don't think Royal Bank of Canada will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Royal Bank of Canada is a great stock to add to your portfolio if income is your focus.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 11 Royal Bank of Canada analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
