1 Top TSX Bank Stock I’d Buy Today
The Motley Fool
Published Apr 20, 2021 19:00
Updated Apr 20, 2021 19:15
1 Top TSX Bank Stock I’d Buy Today
When it comes to big Canadian banks, Royal Bank of Canada (TSX:RY)(NYSE:RY) is one of my top picks.
Indeed, this bank is among the largest in the world for a reason. It’s a lender with a global presence that’s really unparalleled in Canada. Accordingly, I’m of the belief investors looking for banking exposure can’t go wrong considering this name.
Here’s more on why I think Royal Bank is uniquely positioned to outperform in the Canadian banking sector today.
Royal Bank of Canada is as diversified as they come One of the things I like most about Royal Bank is the company’s business model. Unlike its peers, which have higher levels of exposure to specific segments, Royal Bank is well diversified.
Approximately 45% of Royal Bank’s earnings are generated from its commercial and personal lending division. The capital markets segment contributes 25%, whereas 26% of the earnings come from wealth management and insurance. Lastly, this Toronto-based company generates 4% of its income from treasury services.
While 58% of Royal Bank’s revenue comes from Canada, a quarter of its business comes from the United States. Accordingly, this bank is highly diversified — not only in its businesses, but in its geographic reach as well.
For those betting on a broad global recovery coming out of this pandemic, Royal Bank is a great pick. Indeed, I think a lot of this optimism is being priced into Royal Bank stock today. Shares of Royal Bank are up approximately 50% from their lows last year.
That said, I think more upside could be on the horizon, as bank earnings continue to get revised higher.
Royal Bank’s fundamentals remain top notch Royal Bank stock’s fundamentals have been one of the primary reasons why it has remained one of my top picks, irrespective of market dynamics. Despite the ongoing pandemic, this company has reported excellent margins. Royal Bank continues to have a strong liquidity position as reflected in the company’s capital ratios. Additionally, Royal Bank’s return on equity continues to be in the double-digit category.
Currently, Royal Bank trades at a valuation multiple of 14 times earnings, which is quite reasonable. Furthermore, this company has a decent dividend yield of 3.7%. Considering where bond yields are today, this still positions Royal Bank as a solid income pick for long-term investors.
Indeed, there’s also room for optimism when it comes to Royal Bank’s earnings over the near term. As the economy improves, loan-loss provisions will continue to be taken off the lender’s balance sheet. This near-term catalyst, combined with excellent long-term tailwinds, makes Royal Bank a safe and conservative long-term pick for any investor today.
Get The App
The post 1 Top TSX Bank Stock I’d Buy Today appeared first on The Motley Fool Canada.
Fool contributor Chris MacDonald has no position in any of the stocks mentioned in this article.
The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool Canada’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Motley Fool Canada 2021
This Article Was First Published on The Motley Fool
Written By: The Motley Fool
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.