This top TSX stock continues to be the best mega-cap name to buy today
The Canadian banking sector is making a comeback after profits were hit hard by the pandemic. And one of the kings of the dividend – Royal Bank of Canada (TSX: RY) (NYSE: RY) – posted a strong performance in the second quarter compared to the same quarter last year. In addition, this bank is experiencing significant growth in its personal and commercial banking services, wealth management and capital markets.
Here’s a quick look at why RBC should stay at the top of long-term investor watch lists right now.
Profits on the rise
RBC’s latest quarterly results were pretty darn good.
The company reported outstanding net income growth. The mega-cap bank brought in $ 4 billion in the last quarter, an increase of 171% from the $ 1.5 billion recorded in that same quarter a year earlier.
Indeed, most of this growth is related to the elimination of provisions for loan losses since the second quarter of last year. Like its banking peers, Royal Bank was forced to incur large loan loss provisions in the same quarter of the previous year. With those $ 2.8 billion loan losses officially taken off the books, RBC’s net numbers shone in the last quarter.
In addition, RBC’s adjusted earnings per share were $ 2.79. This far exceeded analysts’ consensus estimate of $ 2.51 for this quarter. Growth in all of the company’s core businesses has been strong and the outlook for these businesses looks brighter than at any time during the past year.
Among the companies of note, RBC’s Capital Markets division generated net income of $ 1.1 billion in the last quarter. That was massive growth from last year’s $ 105 million result related to loan loss provisions.
At the end of the line
These improved numbers and the removal of loan loss provisions from RBC’s books are a strong indicator for long-term investors. Indeed, RBC has been bogged down by these potential losses over the past year. With the pandemic seemingly behind the business, investors can now focus on what the future holds.
Indeed, the outlook for most investors is bullish right now. There is reason to believe that economic activity will pick up again. For world-class banks like RBC, this new macroeconomics matters more than most companies.
RBC provides investors with a healthy source of income in addition to excellent prospects for capital appreciation. Indeed, the company’s 3.4% dividend is what I consider the icing on the cake for long-term investors. Given that Royal Bank is overflowing with liquidity and its liquidity ratios remain strong, I expect dividend increases to occur as soon as Canada’s banking regulator allows RBC to do so.
Long-term investors looking for growth and stability simply can’t go wrong with RBC. It’s one of the best mega-cap names in Canada, or the world, for that matter.
Do you like this first choice of the banking sector? Here are some other high growth options to consider right now:
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This article represents the opinion of the author, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We are straight! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer, so we post sometimes articles that may not conform to recommendations, rankings or other content. .
Foolish contributor Chris MacDonald has no position in any of the stocks mentioned.