Tuesday, January 15, 2013

Royal Bank of Canada 2

I own this stock of Royal Bank of Canada (TSX-RY, NYSE-RY). I have had this stock since 1995, which is some 18 years. I have made a total return 18.35% per year, with 13.06% per year coming from capital gains and 5.29% per year coming from dividends. This is what long term investing can get you.

When I look at the insider trading report I find insider selling at $23.4M and insider net selling at $22.4M. The insider selling by the CEO is at $14M and by the CFO at $6.9M. Insider options are not quite as extensive as BMO was (with some 40 pages of insiders with options.) The whole insider report for Royal Bank is just 12 pages long. Since stock options are considered part of salary you tend to get insiders cashing in stock options.

However, as is the case for many companies nowadays, there are not only options, but Rights - Deferred Performance Share Plans, Rights Deferred Share Units, and Rights Performance Deferred Share Units and Rights RBC Share Units.

The CEO has $43.5M in shares and $91M in options. The CFO has $0.8M in shares and $48M in options. An officer has $0.3M in shares and $13.5M in options. A director has $1M in shares and $3.3M in options. This is just to give you an idea of what the options and insider ownership is like.

According to NASDAQ, there are some 327 institutions that own 45% of the outstanding stock. For the 3 months prior to the 2012 year end, institutions increased their shares by 2.2%.

The 5 year low, median and high median Price/Earnings Ratios are 11.55, 16.09 and 18.04. The current P/E Ratio is 11.40 based on 2013 earnings of $5.34 and a stock price of $60.88. This low P/E ratio suggests that the stock price is low.

I get a current Graham Price of $57.27. The 10 year low, median and high median Price/Graham Price Ratios are 1.08, 1.23 and 1.41. The current P/GP Ratio is 1.06. This low ratio suggests that the stock price is low.

The 10 year Price/Book Value per Share Ratio is 2.27 and the current ratio is 2.23, a ratio that is 98% of the 10 year ratio. This ratio suggests that the stock price is at a relatively normal price.

The current dividend yield is 3.94% and the 5 year median dividend yield 6% higher at 4.19%. What you want is a current yield significantly higher than the 5 year median to show a cheap stock price. However, the current yield shows the relatively stock price to be around normal. Mitigating circumstance is that the bank did not raise the dividends in 2009 and 2010.

When I look at analysts' recommendations I find Strong Buy, Buy, Hold and Underperform. The consensus recommendation would be a Hold. The 12 month consensus stock price is $63.00. This implies a total return of 7.44% with 3.94% from dividends and 3.5% from capital gain.

A business blog says that RBC Leads in Canada as takeovers hit a 5-year high. Royal Bank of Canada was the top investment-banking adviser on Canadian deals for the second straight year as mergers surged to a five-year high, led by energy.

Dale Roberts has an interesting take on Canadian banks at Seeking Alpha. He talks about using banks as a one stock portfolio. I have a similar return on this bank as he does.

There is article in the Financial Post dated in November 2012 that talks about RBC posting the biggest profit in Canadian history. There is an article in Daily Finance that gives 3 reasons to buy this stock.

Analysts do not seem particularly excited by this stock as you can see by the 12 months total return at 7.4%. You can see some comments at Stock Chase. Their recommendations are all over the place.

I think that the stock price is relatively low to average. To do well in a stock for the long term, this is where you want the current price to be. I will continue to hold on to this stock and I expect to do well in it over the long term.

Royal Bank of Canada (RY on TSX and NYSE) and its subsidiaries operate under the master brand name RBC. They are one of Canada's largest banks as measured by assets and market capitalization, and are among the largest banks in the world, based on market capitalization. They provide diversified financial services companies, and provide personal and commercial banking, wealth management services, insurance, corporate and investment banking and transaction processing services on a global basis. They have personal, business, public sector and institutional clients through offices in Canada, the U.S. and 56 other countries. Its web site is here RBC. See my spreadsheet at ry.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.

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