Royal Bank of Canada, A Solid Performer

Investments is one of the topics I will be addressing in this blog. With our current financial reality, more and more of us are becoming responsible for our own financial security and therefore for making our own investment decisions.

My credentials for writing about this topic include having passed the Canadian Securities Course required of stock brokers, having written extensively about finances for major publications, and having been an investor for most of my life. Well, at least since age 10, when one of my’ birthday presents was 10 shares of stock in the company now known as Exelon (www.exeloncorp.com,) the Chicago electric utility.

I want to tell you today about another stock that has been a very solid performer for many years, the Royal Bank of Canada (www.rbc.com) (RY-T.) One of Canada’s largest banks, it has a current dividend yield of around 3.8 per cent, and a long record of increasing its dividend. That alone would make it attractive in our current very low interest rate environment.

I own some shares in the Royal, and it has been the single best investment I ever made. While past performance is, as they say, no guarantee of future performance, it certainly is reassuring.

The biggest headwind facing the Royal and other Canadian banks is what may be an overheated housing market, particularly in cities such as Toronto, Vancouver and Montreal. However, the chances of of U.S.-style housing crash are low, in my opinion. Canadian lenders are far more conservative than their American counterparts, and more willing to work with borrowers in trouble.

Another bank that has performed very well over the years is the Toronto Dominion Bank (www.td.com.) In fact, it is hard to go wrong with any of the major Canadian bank stocks. If a bank does get into trouble here, as has happened from time to time,the industry has a history of merging it with another stronger player.

If you want to buy the Royal or any other stock for that matter, it’s a good policy to watch the price over a period of weeks or months. You can even set a price where you will buy, if the current valuation strikes you as too high. Some people recommend buying a position in two or more chunks, not all at once. This may work well if you have the patience to do it.

If you live outside Canada and want to buy the stock of a large Canadian company, most of these companies are also listed on the New York Stock Exchange. Buying them there shields you from currency fluctuation, and the Canadian dollar has been in a swoon against the U.S. dollar for more than a year.

Disclaimer: I am not a stock broker or an investment advisor. I have no connection to the Royal Bank of Canada except as a shareholder and customer. The views expressed above are solely my own and should not be construed as an offer to sell securities.

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