Royal Bank of Canada (TSE:RY) will increase its dividend from last year's comparable payment on the 24th of August to CA$1.35. The payment will take the dividend yield to 4.3%, which is in line with the average for the industry.
Royal Bank of Canada's Earnings Will Easily Cover The Distributions
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.
Royal Bank of Canada has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on Royal Bank of Canada's last earnings report, the payout ratio is at a decent 49%, meaning that the company is able to pay out its dividend with a bit of room to spare.
Looking forward, EPS is forecast to rise by 8.4% over the next 3 years. Analysts forecast the future payout ratio could be 46% over the same time horizon, which is a number we think the company can maintain.
Royal Bank of Canada Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2013, the annual payment back then was CA$2.40, compared to the most recent full-year payment of CA$5.28. This implies that the company grew its distributions at a yearly rate of about 8.2% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
The Dividend Has Growth Potential
The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Royal Bank of Canada has grown earnings per share at 5.3% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.
We Really Like Royal Bank of Canada's Dividend
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 9 analysts we track are forecasting for Royal Bank of Canada for free with public analyst estimates for the company. Is Royal Bank of Canada not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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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.
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