Royal Bank of Canada's (TSE:RY) Dividend Will Be CA$1.42

Royal Bank of Canada (TSE:RY) has announced that it will pay a dividend of CA$1.42 per share on the 22nd of November. This takes the annual payment to 3.4% of the current stock price, which unfortunately is below what the industry is paying.

See our latest analysis for Royal Bank of Canada

Royal Bank of Canada's Earnings Will Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.

Royal Bank of Canada has a long history of paying out dividends, with its current track record at a minimum of 10 years. Taking data from its last earnings report, calculating for the company's payout ratio shows 49%, which means that Royal Bank of Canada would be able to pay its last dividend without pressure on the balance sheet.

The next 3 years are set to see EPS grow by 5.6%. Analysts estimate the future payout ratio will be 47% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

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. The dividend has gone from an annual total of CA$2.68 in 2014 to the most recent total annual payment of CA$5.68. This implies that the company grew its distributions at a yearly rate of about 7.8% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Royal Bank of Canada Could Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Royal Bank of Canada has seen EPS rising for the last five years, at 5.0% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Royal Bank of Canada Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Royal Bank of Canada is a strong income stock thanks to its track record and growing earnings. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 12 analysts we track are forecasting for Royal Bank of Canada for free with public analyst estimates for the company. Is Royal Bank of Canada not quite the opportunity you were looking for? Why not check out our selection of top 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.