Yahoo Finance Royal Bank of Canada (TSE:RY) Has Announced That It Will Be Increasing Its Dividend To CA$1.38
Royal Bank of Canada (TSE:RY) has announced that it will be increasing its dividend from last year's comparable payment on the 23rd of February to CA$1.38. This takes the annual payment to 4.1% of the current stock price, which is about average for the industry.
See our latest analysis for Royal Bank of Canada
Royal Bank of Canada's Earnings Will Easily Cover The Distributions
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.
Royal Bank of Canada has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Royal Bank of Canada's payout ratio of 51% is a good sign as this means that earnings decently cover dividends.
The next 3 years are set to see EPS grow by 13.1%. Analysts forecast the future payout ratio could be 48% over the same time horizon, which is a number we think the company can maintain.
Royal Bank of Canada Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the dividend has gone from CA$2.52 total annually to CA$5.52. This works out to be a compound annual growth rate (CAGR) of approximately 8.2% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
Dividend Growth May Be Hard To Achieve
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings per share has been crawling upwards at 4.4% per year. Growth of 4.4% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.
We Really Like Royal Bank of Canada's Dividend
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 10 Royal Bank of Canada analysts we track are forecasting continued growth with our free report on analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.