There are many options out there for investors seeking out a bargain on the TSX today. But if you’re looking for just one TSX stock to consider, the one I’m buying next has to be Royal Bank of Canada (TSX:RY).
Why Royal Bank?
There are a lot of Canadian banks, but definitely far fewer than those in the United States. And yet during a recession, many fear our banks will fall, just as the American ones have — or worse, go bankrupt. Yet this is incredibly unlikely.
Canadian banks don’t have the competition that there is in the United States. Because of this, there are a lot more funds being drilled into them. That means they can afford to put aside provisions for loan losses. This allows them to put those to good use during periods when loan growth is slow — say, during a market downturn such as this one.
Because of this, Royal Bank stock is in a solid position. It’s the largest bank in terms of both assets and market capitalization. Yet there’s more than just past performance to show why you should invest in this stock.
Rich, richer, richest
Royal Bank stock has become the go-to bank stock for wealthy investors, businesses, corporations, and more. Its wealth and commercial management segment as well as its capital markets segments are highly lucrative.
While it doesn’t have the most exposure to other countries, that’s actually seen as a benefit right now. It invests in emerging markets, sure, but mainly it focuses on its lucrative fields. And if it’s not broken, why fix it?
Clearly, shareholders have been convinced over the years. Shares of Royal Bank stock have increased by 116% in the last decade alone. It now also has a dividend yield at 4.03% for investors to consider. Yet with shares down 3% right now, it could be a good time to buy — but not a great time.
Wait for the dip
This is the next stock to buy and not one to buy right now. Royal Bank stock is likely to slip further in the near future due to a possible market downturn and recession. Banks around the world tend to fall when a recession occurs, and Royal Bank stock isn’t immune.
During the Great Recession, shares of Royal Bank stock fell by about 55% from peak to trough! Sure, we’re expecting a mild recession in the near future, but even the recent double-digit fall Royal Bank stock experienced isn’t anywhere near enough.
So, wait for a dip, and when it happens, pick up Royal Bank stock. It’s shown over the decades that it’s a strong option for investors that’s proven its worth again and again. It remains in the top spot and isn’t likely to give it up easily. And while it trades at 12.5 times earnings, it’s still a steal.
Put Royal Bank stock on your watchlist. I know I will.
