Royal Bank of Canada (TSE:RY) Will Pay A Dividend Of CA$1.42 #CanadaFinance

Royal Bank of Canada (TSE:RY) will pay a dividend of CA$1.42 on the 22nd of November. Even though the dividend went up, the yield is still quite low at only 3.5%.

See our latest analysis for Royal Bank of Canada

While yield is important, another factor to consider about a company’s dividend is whether the current payout levels are feasible.

Having distributed dividends for at least 10 years, Royal Bank of Canada has a long history of paying out a part of its earnings to shareholders. Based on Royal Bank of Canada’s last earnings report, the payout ratio is at a decent 49%, meaning that the company is able to pay out its dividend with a bit of room to spare.

The next 3 years are set to see EPS grow by 5.5%. 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.

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was CA$2.68 in 2014, and the most recent fiscal year payment was 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.

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Royal Bank of Canada has grown earnings per share at 5.0% 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.

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 of these factors considered, we think this has solid potential as a dividend 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. 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.