Royal Bank (RY) Could Be a Great Choice

All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.

Cash flow can come from bond interest, interest from other types of investments, and, of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Headquartered in Toronto, Royal Bank (RY) is a Finance stock that has seen a price change of -3.22% so far this year. The bank is currently shelling out a dividend of $1.19 per share, with a dividend yield of 2.9%. This compares to the Banks - Foreign industry's yield of 2.61% and the S&P 500's yield of 1.43%.

Looking at dividend growth, the company's current annualized dividend of $4.78 is up 11.3% from last year. Over the last 5 years, Royal Bank has increased its dividend 5 times on a year-over-year basis for an average annual increase of 5.79%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Royal Bank's current payout ratio is 45%, meaning it paid out 45% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for RY for this fiscal year. The Zacks Consensus Estimate for 2026 is $11.54 per share, with earnings expected to increase 12.04% from the year ago period.

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers a quarterly payout.

Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, RY presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).

Zacks Names #1 Semiconductor Stock

This under-the-radar company specializes in semiconductor products that titans like NVIDIA don't build. It's uniquely positioned to take advantage of the next growth stage of this market. And it's just beginning to enter the spotlight, which is exactly where you want to be.

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This article originally published on Zacks Investment Research (zacks.com).

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Source Zacks-com