Is it a good company at a reasonable price? This is a good dividend growth stock. I will continue to hold my shares in this bank, but I have no intentions of buying any more share, but then I have no intentions of buying shares in anything at present. I would be cautious about buying shares in this bank at present. The stock price is at a all time high and a lot of my testing is saying it is expensive.
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. This bank has been paying dividends since 1870 although the dividends have not increased every year, they certainly have increased over time. According to my records, the dividends have increased in 32 years out of the last 41 years. The last time dividends did not increase was the two years following 2008.
When I was updating my spreadsheet, I noticed I have done well on this stock. I bought the stock in 1995 and to the end of November 2024 I have a total return of 17.13% per year with 11.58% from capital gains and 5.55% from dividends.
If you had invested in this company in December 2014, for $1,043.12 you would have bought 13 shares at $80.24 per share. In December 2024, after 10 years you would have received $539.24 in dividends. The stock would be worth $1,742.00. Your total return would have been $2,281.24. This would be a total return of 9.27% per year with 5.26% from capital gain and 4.01% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $80.24 | $1,043.12 | 13 | 10 | $539.24 | $1,742.00 | $2,281.24 |
If you had invested in this company in December 1994, for $1,005.94 you would have bought 146 shares at $6.89 per share. In December 2024, after 30 years you would have received $9,800.25 in dividends. The stock would be worth $19,564.00. Your total return would have been $29,364.25. This would be a total return of 15.97% per year with 10.40% from capital gain and 4.93% from dividends. This calculation takes into consideration stock splits, which means that the original cost would be lowered by these splits.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $6.89 | $1,005.94 | 146 | 30 | $9,800.25 | $19,564.00 | $29,364.25 |
The current dividend yield is moderate with dividend growth low. The current dividend yield is moderate (2% to 4% ranges) at 3.40%. The 5, 10 and historical median dividend yields are also moderate at 3.87%, 3.91% and 3.93%. The dividend growth is low (below 8% per year) at 6.7% per year for the past 5 years. The last dividend increase was is for 2025 and it is for 4.23%. However, this bank tends to raise the dividends twice each year.
The Dividend Payout Ratios (DPR) are good. The DPR for 2024 for Earnings per Share (EPS) is good at 49% with 5 year coverage at 47%. The DPR for 2024 for Adjusted Earnings per Share (AEPS) is good at 46% with 5 year coverage at 45%. The DPR for 2024 for Cash Flow per Share (CFPS) is good at 44% with 5 year coverage at 39%. The DPR for 2024 for Free Cash Flow (FCF) is good at 36% with 5 year coverage at 46%. (Although there is no agreement on what the FCF is and not all sites provide one for this stock.)
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 49.16% | 46.70% |
| AEPS | 45.74% | 45.35% |
| CFPS | 44.12% | 39.60% |
| FCF | 35.84% | 45.68% |
Debt Ratios are good. The Long Term Debt/Market Cap Ratio for 2024 is high at 5.80 and currently at 5.71. However, we need also to look at the Long Term Debt/Covering Assets Ratio for 2024 which is good at 0.74 and currently at 0.74 because this is a more important one for a Financial. The Liquidity Ratio for 2024 is good at 3.30 and 3.30 currently. The Debt Ratio for 2024 is good for a bank at 1.06 and 1.06 currently. The bank says that their leverage ratio is 4.2% and 4.2% currently.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R A | 0.74 | 0.74 |
| Lg Term R | 5.80 | 5.71 |
| Intang/GW | 0.11 | 0.11 |
| Liquidity | 3.30 | 3.30 |
| Liq. + CF | 3.71 | 3.70 |
| Debt Ratio | 1.06 | 1.06 |
| Leverage Bk | 4.2% | 4.2% |
| Leverage | 17.07 | 17.07 |
| D/E Ratio | 16.07 | 16.07 |
The Total Return per year is shown below for years of 5 to 41 to the end of 2024. 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. |
|---|---|---|---|---|---|
| 2019 | 5 | 6.69% | 14.83% | 11.02% | 3.80% |
| 2014 | 10 | 7.20% | 11.60% | 8.01% | 3.60% |
| 2009 | 15 | 7.02% | 11.31% | 7.77% | 3.54% |
| 2004 | 20 | 8.87% | 12.92% | 8.90% | 4.02% |
| 1999 | 25 | 10.36% | 14.57% | 10.12% | 4.45% |
| 1994 | 30 | 10.33% | 16.41% | 11.35% | 5.06% |
| 1989 | 35 | 8.95% | 13.86% | 9.90% | 3.97% |
| 1984 | 40 | 8.05% | 14.34% | 9.98% | 4.37% |
| 1983 | 41 | 7.84% | 13.37% | 9.43% | 3.93% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 9.89, 11.81 and 13.49. The corresponding 10 year ratios are 10.32, 11.71 and 13.11. The corresponding historical ratios are 10.17, 11.95 and 13.50. The current P/E Ratio is 14.33 based on a stock price of $174.72 and EPS estimate for 2025 of $12.19. This ratio is above the high ratio of the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 9.20, 11.39 and 13.33. The corresponding 10 year ratios are 10.01, 11.60 and 12.77. The current P/AEPS Ratio is 13.48 based on a stock price of $174.72 and AEPS for 2025 of $12.96. The current ratio is above the high ratio for the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $158.16. The 10-year low, median, and high median Price/Graham Price Ratios are 0.83, 0.96 and 1.08. The current P/GP Ratio is 1.10 based on a stock price of $174.72. The current ratio is above the high ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive.
I get a 10-year median Price/Book Value per Share Ratio of 1.79. The current ratio is 2.07 based on a stock price of $174.72, Book Value of $121,384M and a Book Value per Share of $85.78. The current ratio is 14% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I also have a Book Value per Share of $87.47. The analyst’s calculation of Book Value is different from mine and in this case the 10 year median ratio is 1.66. The Book Value per Share of $89.47 implies a ratio of 1.95 and a Book Value of $126,607M with a stock price of $174.72. This ratio is 17% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10-year median Price/Cash Flow per Share Ratio of 5.64. The current P/CF Ratio is 10.69 based on Cash Flow for the last 6 months of $23,139M, Cash Flow per Share of $16.35 and a stock price of $174.72. This ratio is 90% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 3.93%. The current dividend yield is 3.39% based on dividends of $5.92 and a stock price of $174.72. The current dividend yield is 14% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10 year median dividend yield of 3.91%. The current dividend yield is 3.39% based on dividends of $5.92 and a stock price of $174.72. The current dividend yield is 13% below the 10 median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
The 10-year median Price/Sales (Revenue) Ratio is P/S Ratio is 3.19. The current P/S Ratio is 3.98 based on a stock price of $174.72, Revenue estimate for 2025 of $62,070M, and Revenue per Share of $43.86. The current ratio is 25% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
Results of stock price testing is that the stock price is probably on the expensive side. The dividend yield testing is saying that the stock price is reasonable but above the median. The P/S Ratio testing is saying that the stock price is relatively expensive. If you look at a chart, it is at all time high. A lot of my testing is pointing to a relatively expensive price. I would be cautious about buying this bank at this time.
When I look at analysts’ recommendations, I find Strong Buy (6), Buy (6), Hold (3), and Underperform (1). The consensus would be a Buy. The 12 month stock price consensus is $186.00, with a high of $200.00 and low of $143.00. The consensus stock price of $186.00
Analysts like this stock on Stock Chase but many feel that it might be overpriced currently. Stock Chase gives this stock 5 stars out of 5. Amy Legate-Wolfe on Motley Fool thinks that this is a great buy and hold stock. Chris MacDonald on Motley Fool thinks that the Canadian Market will outperform the US one in 2025. He thinks that this bank is a reliable earner and dividend payer. This bank put out a press release on Newswire about their fourth quarter of 2024.
Simply Wall Street via Yahoo Finance put out a report on this bank and its dividends. Simply Wall Street lists no risks for this bank. It gives it 4 stars out of 5.
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 US 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 Wednesday, January 8, 2025 around 5 pm. Tomorrow on my other blog I will write about Dividend Stocks January 2025 learn more on Tuesday, January 7, 2025 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.
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