Is it a good company at a reasonable price? Canadian banks have provided shareholders with good total returns in the past and they should continue to provide a reasonable total return in the future. I do like this bank and that is why I have shares in it. The current price seems to be within the reasonable range.
I own this stock of Royal Bank of Canada (TSX-RY, NYSE-RY). At the time I bought this stock it was on Mike Higgs' list of Canadian Dividend Growth Stocks and on the dividend lists I followed as were all the banks. In 1995 I bought this stock and this is the second bank stock that I have bought.
When I was updating my spreadsheet, I noticed I have done well on this stock which I purchased in 1995, over 28 years ago. My total return is 16.83% with 10.90% from capital gains and 5.93% from dividends.
If you had invested in this company in December 2013, for $1,071.15 you would have bought 15 shares at $71.41 per share. In December 2023, after 10 years you would have received $580.65 in dividends. The stock would be worth $2,010.00. Your total return would have been $2,590.65. This is a total return would be a total return of 10.50% per year with 6.50% from capital gain and 4.00% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $71.41 | $1,071.15 | 15 | 10 | $580.65 | $2,010.00 | $2,590.65 |
If you had invested in this company in December 1993, for $1,005.36 you would have bought 142 shares at $7.08 per share. In December 2023, after 30 years you would have received $5,450.55 in dividends. The stock would be worth $19,028.00. Your total return would have been $27,815.67. This is a total return would be a total return of 15.24% per year with 10.30% from capital gain and 4.95% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $7.08 | $1,005.36 | 142 | 30 | $8,787.67 | $19,028.00 | $27,815.67 |
The current dividend yield is moderate with dividend growth low. The current dividend yield is moderate (2% to 4% range) at 4.10%. The 5, 10 and historical dividend yields are moderate at 4.04%, 3.89% and 3.95%. The dividend growth is low (below 8%) at 6.5% per year for the past 5 years. The last dividend increase was in 2024 and it was for 2.2%. However, as with all Canadian banks, this bank tends to increase the dividends two to three times a year.
The Dividend Payout Ratios (DPR) are fine. The DPR for 2023 for Earnings per Share (EPS) is fine at 50% with 5 year coverage at 45%. The DPR for 2023 for Adjusted Earnings per Share (AEPS) is good at 46% with 5 year coverage at 46%. The DPR for 2023 for Cash Flow per Share (CFPS) is fine at 43% with 5 year coverage at 39%. The DPR for 2023 for Free Cash Flow (FCF) is good at 24% with 5 year coverage at 12%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 50.19% | 45.96% |
| AEPS | 46.39% | 45.73% |
| CFPS | 43.81% | 38.81% |
| FCF | 24.13% | 12.42% |
Debt Ratios are fine. The Long Term Debt/Covering Asset Ratio for 2023 is good at 0.71 and currently at 0.71. The Long Term Debt/Market Cap Ratio is not important for banks. The Liquidity Ratio for 2023 is good at 3.39 and 3.39 currently, but this ratio is again not important for banks. The Debt Ratio for 2023 is fine at 1.06 and 1.03 currently and anything over around 1.04 is fine for banks. The Leverage is determined differently for banks.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R A | 0.71 | 0.71 |
| Lg Term R | 7.93 | 6.57 |
| Intang/GW | 0.12 | 0.10 |
| Liquidity | 3.39 | 3.39 |
| Liq. + CF | 3.86 | 3.86 |
| Debt Ratio | 1.06 | 1.06 |
The Total Return per year is shown below for years of 5 to 40 to the end of 2023. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2018 | 5 | 6.54% | 11.65% | 7.48% | 4.17% |
| 2013 | 10 | 7.12% | 10.50% | 6.50% | 4.00% |
| 2008 | 15 | 6.96% | 13.93% | 9.14% | 4.79% |
| 2003 | 20 | 8.83% | 11.90% | 7.72% | 4.18% |
| 1998 | 25 | 10.33% | 12.19% | 8.18% | 4.00% |
| 1993 | 30 | 10.30% | 15.24% | 10.30% | 4.95% |
| 1988 | 35 | 8.93% | 14.86% | 10.03% | 4.83% |
| 1983 | 40 | 8.03% | 13.17% | 8.98% | 4.19% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 10.31, 11.61 and 13.29. The corresponding 10 year ratios are 10.42, 11.71 and 13.11. The corresponding historical ratios are 10.29, 11.81 and 13.49. The current P/E Ratio is 12.34 based on a stock price of $134.63 and EPS estimate for 2024 of $10.91. The current P/E Ratio is between the median and high ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I also have Adjusted Earnings per Share (data). The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 9.55, 12.39 and 12.87. The corresponding 10 year ratios are 10.51, 11.60 and 12.77. The current ratio is 11.81 based on a stock price of $134.63 and AEPS estimate for 2024 of $11.40. The current P/E Ratio is between the median and high ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a Graham Price of $143.10. The 10-year low, median, and high median Price/Graham Price Ratios are 0.88, 0.98 and 1.08. The current P/GP Ratio is 0.94 based on a stock price of $134.63. The current ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10-year median Price/Book Value per Share Ratio of 1.82. The current P/B Ratop is 1.69 based on a Stock Price of $134.63, Book Value of $111,592M and Book Value per share of $79.83. The current ratio is 8% below the 10 year median ratio. his stock price testing suggests that the stock price is relatively reasonable and below the median.
I also have a Book Value per Share estimate for 2024 of $82.60. This implies a P/B Ratio of 1.63 with a stock price of $134.63 and Book Value of $115.836M. This ratio is 11% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10-year median Price/Cash Flow per Share Ratio of 5.64. The current P/CF Ratio is 7.24 based on Cash Flow for the last 12 months of $26,079M, Cash Flow per Share of $18.60 and a stock price of $134.63. The current ratio is 28% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. However, most analysts do not consider cash flow important for banks.
I get an historical median dividend yield of 3.95%. The current dividend yield is 4.10% based on dividends of $5.52 and a stock price of $134.63. The current yield is 3.8% above the historical dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median dividend yield of 3.89%. The current dividend yield is 4.10% based on dividends of $5.52 and a stock price of $134.63. The current yield is 5.5% above the 10 year dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The 10-year median Price/Sales (Revenue) Ratio is 3.17. The current P/S Ratio is 3.31 based in a stock price of $134.63, Revenue estimate for 2024 of $56,987M and Revenue per Share of $40.64. The current ratio is 4% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
Results of stock price testing is that the stock price is probably reasonable. The dividend yield tests are showing that the stock price is reasonable and below the median. The P/S Ratio test confirms the reasonable price, but shows that the stock price is above the median. Most of the rest of the testing is showing that the stock price is reasonable and above or below the median.
When I look at analysts’ recommendations, I find Strong Buy (4), Buy (6), Hold (4) and Underperform (1). The consensus would be a Buy. The 12 months stock price consensus is $135.23 with a high of $148.00 and low of $100.00. The consensus stock price of $135.23 implies a total return of 4.35% with 0.45% from capital gains and 4.10 from dividends.
Stock Chase . Stock Chase gives this stock 5 stars out of 5. This bank is on all the dividend lists that I follow. Ambrose O'Callaghan on Motley Fool says this bank is in a favourable value territory. Aditya Raghunath on Motley Fool thinks this bank should be on your shopping list for 2024. This company put out a press release on Newswire about their 2023 year end results.
Simply Wall Street via Yahoo Finance looks at the dividend payments for this bank. Simply Wall Street gives this bank 3 and one half stars out of 5. They list not risks.
Royal Bank of Canada is one of the two largest banks in Canada. It is a diversified financial services company, offering personal and commercial banking, wealth-management services, insurance, corporate banking, and capital markets services. The bank is concentrated in Canada, with additional operations in the U.S. and other countries. Its web site is here Royal Bank of Canada.
The last stock I wrote about was about was Bank of Montreal (TSX-BMO, NYSE-BMO) ... learn more. The next stock I will write about will be Rogers Sugar Inc (TSX-RSI, OTC-RSGUF) ... learn more on Monday, January 8, 2024 around 5 pm.
This blog is meant for educational purposes only and is not to provide investment advice. I am not a licensed professional investment advisor. 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.
See my site for an index to these blog entries and for stocks followed. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
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