Is it a good company at a reasonable price? You have to wonder at the Strong Buy from analysts with a stock price in 12 months less than the stock price today. Of course, all stocks get Strong Buy from analysts, so this is really not a surprise. I do think that this is a good bank. It is a dividend growth stock and those of the sort of companies I like. However, I do think that it is expensive. The stock price is also near an all-time high. It is testing as relatively expensive.
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.
When I was updating my spreadsheet, I noticed I have done well with this bank. I bought it in 1995 and I have made 17.25% per year with 11.93% from capital gains and 5.32% from dividends.
If you had invested in this company in December 2015, for $1,038.10 you would have bought 14 shares at $74.15 per share. In December 2025, after 10 years you would have received $621.04 in dividends. The stock would be worth $3,275.86. Your total return would have been $3,896.90. This would be a total return of 15.75% per year with 12.18% from capital gain and 3.57% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $74.15 | $1,038.10 | 14 | 10 | $621.04 | $3,275.86 | $3,896.90 |
The current dividend yield is moderate with dividend growth low. The current dividend yield is moderate (2% to4% ranges) at 2.80%. The 5, 10 and historical median dividend yields are moderate at 2.83%, 2.85% and 3.92%. The dividend increases for the past 5 years are low (below 8% per year) at 6.8% per year. The last dividend increase was in 2025 and it was for 6.5%. The dividends between the 2025 and 2026 financial years are up by 10.8%. Note that this bank tends to raise the dividends several time a year.
The Dividend Payout Ratios (DPR) are good. The DPR for 2024 for Earnings per Share (EPS) is good at 42% with 5 year coverage at 45%. The DPR for 2024 for Adjusted Earnings per Share (AEPS) is good at 41% with 5 year coverage at 43%. The DPR for 2024 for Cash Flow per Share (CFPS) is good at 36% with 5 year coverage at 38%. The DPR for 2024 for Free Cash Flow (FCF) is good at 45% with 5 year coverage at 48%. I can only find one value for 2025 for FCF.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 42.08% | 44.53% |
| AEPS | 41.03% | 42.86% |
| CFPS | 35.80% | 37.91% |
| FCF | 45.26% | 48.18% |
Debt Ratios are good. The Long Term Debt/Market Cap Ratio for 2025 is high at 5.27 and currently at 4.62. However, we need also to look at the Long Term Debt/Covering Assets Ratio for 2025 which is good at 0.76 and currently at 0.76 because this is a more important ratio for a financial. The Liquidity Ratio for 2025 is good at 2.25 and 2.25 currently, but this is not an important ratio for banks. The Debt Ratio for 2025 is good at 1.06 and 1.06 currently for a bank. The Leverage Ratio for 2025 is good at 4.2% and currently at 4.4%.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R A | 0.76 | 0.76 |
| Lg Term R | 5.27 | 4.62 |
| Intang/GW | 0.09 | 0.08 |
| Liquidity | 2.25 | 2.25 |
| Liq. + CF | 3.45 | 3.43 |
| Debt Ratio | 1.06 | 1.06 |
| Leverage Bk | 4.2% | 4.4% |
The Total Return per year is shown below for years of 5 to 42 to the end of 2025. 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. |
|---|---|---|---|---|---|
| 2020 | 5 | 6.80% | 21.07% | 17.47% | 3.60% |
| 2015 | 10 | 6.89% | 15.75% | 12.18% | 3.57% |
| 2010 | 15 | 7.50% | 14.02% | 10.50% | 3.51% |
| 2005 | 20 | 8.42% | 11.80% | 8.65% | 3.15% |
| 2000 | 25 | 9.81% | 12.66% | 9.37% | 3.29% |
| 1995 | 30 | 10.51% | 16.84% | 12.09% | 4.75% |
| 1990 | 35 | 9.00% | 15.34% | 11.21% | 4.12% |
| 1985 | 40 | 8.23% | 14.38% | 10.49% | 3.89% |
| 1983 | 42 | 7.83% | 13.62% | 9.98% | 3.64% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 10.33, 12.08, 13.49. The corresponding 10 year ratios are 10.32, 11.95 and 13.39. The corresponding historical ratios are 10.29, 12.08 and 13.51. The current ratio is 15.15 based on a stock price of $233.99 and EPS estimate for 2026 of $15.44. 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 also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Earnings per Share Ratios are 9.55, 11.82 and 13.33. The corresponding 10 year ratios are 10.06, 11.82 and 13.10. The corresponding historical ratios are 10.23, 11.64 and 13.23. The current ratio is 14.96 based on a stock price of $233.99 and AEPS estimate for 2026 of $15.64. 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 $183.03. The 10-year low, median, and high median Price/Graham Price Ratios are 0.83, 0.96 and 1.09. The current ratio is 1.28 based on a stock price of $233.99. 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 2.46 based on a stock price of $233.99, Book Value of $133,343M and Book Value per Share of $95.20. The current ratio is 38% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I also have a Book Value per Share estimate for 2026 of $97.52. This implies a Book Value of $136,590M and a ratio if 2.40 with a stock price of $233.99. This Book Value per Share is calculated differently that how I calculate it and with this calculation, the 10 year median ratio is 1.66. The current ratio is 44% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get a 10-year median Price/Cash Flow per Share Ratio of 5.63. The current ratio is 5.94 based on Cash Flow per share for the past 12 months of $39.42, Cash Flow of $55,520M and a stock price of $233.99. The current ratio is 5% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get an historical median dividend yield of 3.92%. The current dividend yield is 2.80% based on dividends of $6.56 and a stock price of $233.99. The current dividend yield is 28% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median dividend yield of 3.85%. The current dividend yield is 2.80% based on dividends of $6.56 and a stock price of $233.99. The current dividend yield is 27% below the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
The 10-year median Price/Sales (Revenue) Ratio is 3.26. The current ratio is 4.67 based on Revenue estimate for 2026 of $70,193M, Revenue per Share of $50.12 and a stock price of $233.99. The current ratio is 43% 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 relatively expensive. The dividend yield tests are saying that the stock price is relatively expensive and it is confirmed by the P/S Ratio test. Almost all the tests are showing that the stock price is expensive. The exception is the P/CF Ratio test which for banks is not a good test as cash flow tends to fluctuate a lot for banks.
When I look at analysts’ recommendations, I find Strong Buy (8), Buy (5), Hold (2) and Underperform (1). The consensus is a Strong Buy. The 12 month stock price consensus is $233.13 with a high of $248.00 and low of $196.00. The 12 month stock price of $233.13 implies a total return of 2.44% with 0.37% from a capital loss and 2.80% from dividends based on a currently stock price of $233.99. You have to wonder at a Strong Buy recommendation and a 12 month stock price less than the current price.
Analysts are giving ratings on Stock Chase for this bank of Buy, Hold, Watch and Partial Sell. Some think the bank is fully valued. Amy Legate-Wolfe on Motley Fool thinks that this bank is the good to bank for Canadian investors. Chris MacDonald on Motley Fool thinks that this bank is the defensive blue-chip option for investors. This bank put out a press release via Newswire about their fourth quarter of 2025.
Simply Wall Street via Yahoo Finance reviews this stock and says the value is $258.01 CDN. (They also say that the current value is $190.65 and I do not know where they got that from as this stock has not been below $200 for some time.) Simply Wall Street gives one risk of significant insider selling over past 3 months. However, as far as I can see from INK, insider are taking cash not stocks for rights and options. Over the past year the CEO, CFO and other officers have increased their stock held. A couple of directors have also, but not the chairman.
Royal Bank of Canada is one of the two largest banks in Canada. The bank is concentrated in Canada and has dominant market shares. RBC also has wealth and capital market businesses in the US, UK, and other countries. RBC is a top 15 investment bank globally. 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 Friday, January 9, 2026 around 5 pm. Tomorrow on my other blog I will write about Something to Buy January 2026.... learn more on January 8, 2026 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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