This is an analysis completed by The Dividend Guy. It is not to be used as investment advice or a recommendation to buy, hold, or sell any stocks discussed. Please ensure you complete your own analysis.
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In a recent post, I wrote about how the Royal Bank has been one of my strongest holdings to date. However, I have not shown an analysis of the stock on this blog and wanted to do that. In addition, as I do not as of yet have any Canadian stocks on my Watch List, I had to complete the analysis (I did my original analysis a number of years ago) in order to include it. Royal Bank is a very widely held stock and a strong dividend player. Here is how the stock looks according to my personal look at it.
The Company: Royal Bank of Canada (RY-TSX)
ROYAL BANK OF CANADA provides personal and commercial banking, wealth management services, insurance, corporate and investment banking and transaction processing services on a global basis. Royal Bank of Canada and its subsidiaries operate under the master brand name of RBC.
| Yes | |
| Yes |
THE FUNDAMENTALS
Revenue
Click to EnlargeRevenue Scoring
| Criteria | Scoring |
| Consistenly Up with No Down Years | 1.0 |
| Up Trend with Less Than 2 Down Years | 0.5 |
| Choppy with Greater Than 2 Down Years | 0.0 |
| My Revenue Score | 0.5 out of 1.0 |
Earnings Per Share
Click to EnlargeEarnings Per Share Scoring
| Criteria | Scoring |
| Consistenly Up with No Down Years | 1.0 |
| Up Trend with Less Than 2 Down Years | 0.5 |
| Choppy with Greater Than 2 Down Years | 0.0 |
| My EPS Score | 0.5 out of 1.0 |
TOTAL FUNDAMENTALS SCORE: 1.0 out of 2.0
THE RATIOS
Return on Equity
Click to EnlargeReturn on Equity Scoring
| Criteria | Scoring |
| Above 15% for Last 5 Years | 1.0 |
| At Least One Year Below 15% in Last 5 Years | 0.0 |
| My ROE Score | 0.0 out of 1.0 |
Other Ratios
| Ratio | Criteria | Value | Score (Pass=1 / Fail = 0) |
| Debt to Equity | Less Than 0.50 | 3.37 | 0.0 |
| Payout Ratio | Less Than 60% | 50% | 1.0 |
| Credit Rating | BBB+ | AAA+ | 1.0 |
| Total Ratio Score | 2.0 out of 3.0 |
TOTAL RATIOS SCORE: 2.0 out of 4.0
DIVIDEND DATA
Annual Dividends
Click to EnlargeDividend Growth Years
| Criteria | Scoring |
| 10+ Years of Dividend Growth | 1.0 |
| Less Than 10 Years of Dividend Growth | 0.0 |
| My Dividend Growth Years Score | 1.0 out of 1.0 |
Dividend Growth Rate
Click to Enlarge| Criteria | Scoring |
| 3 Year Div Growth Greater Than or Equal 12% | 1.0 |
| Current Year Div Growth Less Than Previous Year | 0.0 |
| My Dividend Growth Rate Score | 1.0 out of 1.0 |
TOTAL DIVIDEND GROWTH SCORE: 2.0 out of 2.0
STOCK VALUATION
| Valuation Metric | Criteria | Value | Score (Pass=1 / Fail = 0) |
| Dividend Yield | Cur Yld Greater Than 10 Yr Avg Yld | 1.2% | 1.0 |
| Div Yld Compared to SPY Div Yld | Cur Yld Greater Than SPY Yld | 3.0% | 1.0 |
| P/E Ratio | Cur P/E Less Than 10 Yr Avg P/E | 13.1 | 1.0 |
| Relative P/E | Relative P/E Less Than 1.0 | 0.79 | 1.0 |
| Price to Sales | Less Than 1.5 | 1.48 | 1.0 |
| Total Ratio Valuation Score | 5.0 out of 5.0 |
Expected Return
| Criteria | Scoring | |
| Expected Return Score Greater Than 10% | – | 1.0 |
| Expected Return Score Less Than 10% | – | 0.0 |
| My Expected Return Score | 19.2% | 1.0 out of 1.0 |
TOTAL STOCK VALUATION SCORE: 6.0 out of 6.0
TARGET PRICE
Canadian Shareowner’s Association Stock Selection Guide Software Buy Price
| Buy Zone |
Maybe Zone |
Sell Zone |
Current Price | Rating | Scoring (Buy=2.0, Other=0.0) |
| 2.0 |
TOTAL TARGET PRICE SCORE: 2.0 out of 2.0
SUMMARY
Points Earned:
13 out of 16 – half points are rounded down to be conservative
The stock is rated MEDIUM with 13 points earned through my analysis of the stock. Dividend growth has been strong in the past and the company has continued to perform well. Although both the sales and earnings numbers saw some dips in the past 10 years, I am encouraged that each of the following years the company’s numbers went through the roof. Overall, RY is a well run company whose share price has been held down in the past few months because of the sub-prime mess. Once we get through that I am confident we will see better price performance (no guarantees though!!).
| Rating | Points Required |
| High | 14+ points |
| Medium | 10-13 points |
| Low | Less Than 10 points |
Reminder: This is an analysis completed by The Dividend Guy. It is not to be used as investment advice or a recommendation to buy, hold, or sell any stocks discussed. Please ensure you complete your own analysis.
The Dividend Guy does not own shares in RY
Nice review. As somebody looking to get started in dividend stock investing, is there a particular website or resource that you use to get specific company financial data? Thanks.
Another great review!
I missed the big dip on July 15 despite being poised with cash-in-hand in my discount brokerage account – we were out camping on a little west coast island with limited laptop access. The stock prices of all big banks, insurance and large financials experienced a nice drop that day.
I am curious as to why you do not have any Canadian stocks on your current watch list?
Cheers
Great post. I’m definitely a fan of RY and have a position on it. I like the stats and figures brought forth. Good work – you definitely did your homework.
P.S. Check out my site sometime, i’m new to the blog world!
Nice analysis. I am considering looking at the canadian banks in an effort to increase my international dividend exposure. Do you have any other canadian dividend ideas to review?
Nice breakdown. But you don’t own shares in UPS? I am sure this must be a typo considering you are analyzing Royal Bank and stated in the beginning you already hold RY shares.
Your scoring system doesn’t take into account that RY did not raise the dividend at all in the past year, and could remain on hold for several more quarters. Therefore all these points that you allocate to RY are somewhat…pointless.
I am not sure where you got your info from, but Mergent’s dividend Achievers 2007 lists RY as having 12 years of dividend growth.
The Royal Bank web site only lists dividends back to 2000.
As far as I can tell they are an achiever, not an aristocrat.
Very well done! I am a happy RY shareholder.
Best Wishes,
D4L
Please explain one discrepancy. In your disclosure you indicate that “The Dividend Guy does not own shares in RY”, but in a recent post you talk about how it’s your largest holding – what gives?