- RY is one of 5 AAA rated companies in the world.
- Quarterly allowances for loan losses were 48% lower than a year ago.
- Shares outstanding were almost flat, very different from big US banks which increased shares by up to 35% to meet government mandated net capital requirements.
- Perhaps the most striking data point was RY's return on equity (ROE). ROE for its second quarter was near 17%, almost as high as its 10-year average and almost double that of the big US banks.
At the above right is our proprietary Dividend Valuation Mode for RY (click to enlarge). The model suggests that the company may be as much as 14% undervalued, based on the year-ahead dividend growth we project. As we have said before, the Dividend Valuation Model is based on historical relationships of price versus dividend growth and changes in interest rates. These relationships may not hold true into the future, but on a historical basis the model has been able to predict the annual movement in the price of the stock at near 90%.
We'll have more to say about Bond-Like stocks in the coming weeks. Next time we'll describe the hidden value of rising dividends.
Clients and principals of Donaldson Capital Management own RY. See the conditions for use of this blog site at the right.