Royal Bank of Canada (TSE:RY) Is Increasing Its Dividend To CA$1.32

Royal Bank of Canada's (TSE:RY) dividend will be increasing from last year's payment of the same period to CA$1.32 on 24th of May. The payment will take the dividend yield to 4.0%, which is in line with the average for the industry.

See our latest analysis for Royal Bank of Canada

Royal Bank of Canada's Payment Expected To Have Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

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 48% is a good sign as this means that earnings decently cover dividends.

Looking forward, EPS is forecast to rise by 3.5% over the next 3 years. Analysts forecast the future payout ratio could be 46% 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 been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2013, the annual payment back then was CA$2.28, compared to the most recent full-year payment of CA$5.28. This implies that the company grew its distributions at a yearly rate of about 8.8% over that duration. 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.

Royal Bank of Canada Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Royal Bank of Canada has impressed us by growing EPS at 6.7% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

Royal Bank of Canada Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 11 analysts we track are forecasting for Royal Bank of Canada for free with public 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.