Royal Bank 2

Yesterday, I talked about the Royal Bank and what a good investment it has been for me. Today, I want to look at this bank as a good investment at the current time. There are diverse analyst ratings on this stock from Buy to Hold. No one thinks that the earnings are going to be going up much, or maybe going down some, for the October 2008 annual reporting date. In any case, they will not be great.

No Canadian bank has done well this year and they are not expected to do well in the short term. Usually, the Royal Bank raises it dividends twice a year. This year they missed an increase for May 2008 and so far, we do not know if there will be a rise in November 2008or not. In any event, the dividend raise this year will be half the usual increase. Dividends were raised 9.9% compared to the average annual raise of 19.8% over the last 5 years. The Return of Equity (ROE) for the quarterly report of April 2008 is 16.7%, and is lower than the 5 year average of 18.4%. These are the negative features shown in my spreadsheet.

I calculate the current Graham Price to be $43.92 compared to the current price of $45.27. These figures are very close. Also, the estimated P/E for 2008 is 10.6%, which is low compared the 5 year average of 14.6%. The estimated dividend yield for 2008 is 4.42, which is higher than the 5 year average of 3.18%. Also, the Price/Book Value ratio at 2.2542 is lower than the 5 year average of 2.65 and close to the 10 year average of 2.2492. All these factors point to this stock being at a good price to buy currently.

A theory is to buy good stocks when they have been beaten down. I agree with this, and Royal Bank has certainly been beaten down recently. There are lots of indicators to show that it is at a good price currently. However, expect some problems in the short term.

Its web site is www.rbc.com. See my spreadsheets on this company at www.spbrunner.com/stocks/ry.htm. I have reloaded my spreadsheet with new figures because of the Quarterly Report for April 2008.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on web site.