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Just Four Days Till Royal Bank of Canada (TSE:RY) Will Be Trading Ex-Dividend

Simply Wall St
·3 mins read

Royal Bank of Canada (TSE:RY) stock is about to trade ex-dividend in 4 days. Investors can purchase shares before the 23rd of October in order to be eligible for this dividend, which will be paid on the 24th of November.

Royal Bank of Canada's next dividend payment will be CA$1.08 per share. Last year, in total, the company distributed CA$4.32 to shareholders. Based on the last year's worth of payments, Royal Bank of Canada has a trailing yield of 4.4% on the current stock price of CA$97.34. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Royal Bank of Canada can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Royal Bank of Canada

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Royal Bank of Canada paid out more than half (55%) of its earnings last year, which is a regular payout ratio for most companies.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Royal Bank of Canada earnings per share are up 5.3% per annum over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Royal Bank of Canada has delivered 8.0% dividend growth per year on average over the past 10 years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

From a dividend perspective, should investors buy or avoid Royal Bank of Canada? Royal Bank of Canada has been generating some growth in earnings per share while paying out more than half of its earnings to shareholders in the form of dividends. In sum this is a middling combination, and we find it hard to get excited about the company from a dividend perspective.

Curious what other investors think of Royal Bank of Canada? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

This article by Simply Wall St is general in nature. 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.

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