Royal Bank of Canada (USA) Reports Record Q4 Profit: Should You Buy Now? | The Motley Fool Canada

Royal Bank of Canada (USA) Reports Record Q4 Profit: Should You Buy Now? | The Motley Fool Canada: "Royal Bank of Canada (TSX:RY)(NYSE:RY), the second-largest bank in Canada in terms of total assets, was a solid quarter overall for RBC, so I think the market has reacted correctly by sending its shares higher. I also think this could be the start of a sustained rally higher and that the stock represents a great long-term investment opportunity today, because is still trades at attractive valuations and is one of the top dividend plays in the market.

First, RBC’s stock still trades at just 11.6 times fiscal 2015’s adjusted earnings per share of $6.66 and only 11.2 times fiscal 2016’s estimated earnings per share of $6.91, both of which are inexpensive compared with its five-year average price-to-earnings multiple of 12.8 and the industry average multiple of 13.

It also trades at just 1.96 times its book value per share of $39.51, which is a major discount compared with its market-to-book value of 2.38 at the conclusion of fiscal 2014 and its five-year average price-to-book value of 2.21.

At the very least, I think the company’s stock should trade at 12.5 times earnings, which would place its shares upwards of $86 by the conclusion of fiscal 2016, representing upside of more than 11% from today’s levels.

Second, RBC pays an annual dividend of $3.16 per share, which gives its stock a very generous 4.1% yield. It has also raised its dividend for five consecutive years, and it has a target dividend payout range of 40-50% of net income, so it is safe to assume that it will announce another increase in 2016.

With all of the information provided above in mind, I think Foolish investors should strongly consider beginning to scale in to long-term positions in Royal Bank of Canada today."



'via Blog this'