Royal Bank of Canada (TSE:RY) Will Pay A Larger Dividend Than Last Year At CA$1.42

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 August to CA$1.42. Even though the dividend went up, the yield is still quite low at only 3.9%.

Check out our latest analysis for Royal Bank of Canada

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

Even a low dividend yield can be attractive if it is sustained for years on end.

Royal Bank of Canada has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but Royal Bank of Canada's payout ratio of 50% is a good sign as this means that earnings decently cover dividends.

Looking forward, EPS is forecast to rise by 3.1% over the next 3 years. 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 2014, the dividend has gone from CA$2.68 total annually to CA$5.68. This implies that the company grew its distributions at a yearly rate of about 7.8% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. However, Royal Bank of Canada has only grown its earnings per share at 4.6% per annum over the past five years. Growth of 4.6% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

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. Distributions are quite easily covered by earnings, which are also being converted to cash flows. 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. 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 11 Royal Bank of Canada analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.