Royal Bank of Canada

On my other blog I am today writing about Shareholder Value Maximization continue...

I own this stock of Royal Bank of Canada (TSX-RY, NYSE-RY). In 1995 I bought this stock and this is the second bank stock that I have bought. At that time this stock was on Mike Higgs' list of Canadian Dividend Growth Stocks and on the dividend lists I followed as were all the banks.

I have dividend information going back to 1986 for this bank. In years after 2008 is not the first time that dividends have been held steady. It would seem that this also occurred for this bank in the early 1990's. However, considering that dividends were held steady from 2008 to 2011 inclusive, the dividend growth is still moderate over the past 5 and 10 years at 6.7% and 10.6% per year.

Banks tend to raise dividend more than once within a financial year. For example in 2014 dividends were raised by 6.3% at the beginning of the period and then by another 6% half way through the year. The last dividend increase was for 5.6% at the start of 2015.

The 5 year median Dividend Payout Ratio for EPS is at 52%. The DPR for 2014 was at 46%. This stock has an historical median DPR of 39%. However, DPR for EPS has been declining since 2009 when it hit a high of 77.8%. At the same time dividend increases have been growing from the total of 4% increase of 2011 to the total 12.2% increase in 2014.

What I have noticed for the Banks is that the Debt Ratios used to be around 1.04 prior to 2008and now mostly are at 1.06. However, the Debt Ratios have varied over time. The Debt Ratios for banks have always been quite different than most other companies where you expect a good Debt Ratio to be at 1.50.

The other thing about banks is that the Leverage and Debt/Equity Ratios tend to be quite high. For this bank they are at 17.26 and 16.26 respectively in 2014. The 10 year median ratios are 17.84 and 16.84. This is pretty much normal for a bank.

The Return on Equity has been quite good for this Bank. It has not been below 10% over the past 20 years. The ROE for 2014 was 16.3% and the 5 year median ROE is at 16.2%. The ROE on comprehensive Income was 20.2% in 2014 and its 5 year median was 19.6%.

I have had this stock since 1995 and I have received $25.68 per share in dividends. The original stock price cost is at $7.26 so my share cost has long been covered by dividend income. My total return for this stock is at 18.48% per year with 14.12% from capital gains and 4.36% from dividends. I have had this stock for just over 18 years.

Sound bite for Twitter and StockTwits is: Bank Dividend Growth Stock. I expect that especially in the near future that the return on this bank will not be as good as in the past. The 5 and 10 year total return on this stock is at 12.24% and 9.40% per year with 5.17% and 5.70% from capital gains and 4.07% and 3.70% from dividends. See my spreadsheet at ry.htm.

This is the first of two parts. The second part will be posted on Tuesday, January 13, 2015 and will be available here. The first part talks about the stock and the second part talks about the stock price.

Royal Bank of Canada (RY on TSX and NYSE) and its subsidiaries operate under the master brand name RBC. They are one of Canada's largest banks as measured by assets and market capitalization, and are among the largest banks in the world, based on market capitalization. They provide diversified financial services companies, and provide personal and commercial banking, wealth management services, insurance, corporate and investment banking and transaction processing services on a global basis. They have personal, business, public sector and institutional clients through offices in Canada, the U.S. and 56 other countries. Its web site is here RBC.

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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

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