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Summary
Investors, especially in these times of the coronavirus crisis, have often turned to stocks that come with the promise of a dividend payout. Currently, top Canadian lender Royal Bank of Canada (TSX:RY) and energy company Enbridge Inc (TSX:ENB) are trending on the Toronto Stock Exchange (TSX) among stocks with the highest dividend yield.
By definition, dividends are distributed from a company’s earnings. It can be distributed through cash payments, stocks, etc. During COVID times, many companies were forced to snip dividends as their earnings decreased or completely vanished.
The S&P/TSX Canadian Dividend Aristocrats Index is down 14.4 per cent this year. However, the stocks of Royal Bank of Canada and Enbridge reflect a steady rebound since the March lows in the last seven months. Let’s take a closer look at these trending dividend-paying stocks:
Royal Bank of Canada (TSX:RY)
Current Stock Price: C$ 95.9
Stocks of Royal Bank of Canada is a day away from ex-dividend trade, due on Friday, October 23. The scrips are registering a surge in trading activity, with its 10-day average share trading volume climbing to 4.5 million. The ex-dividend is payable on November 24.
The Royal Bank of Canada paid quarterly dividend of C$ 1.08 per cent. It currently holds a dividend yield of 4.505 per cent, as per the data on the TMX. The C$ 136-billion market cap corporation reflects a five-year dividend growth of 6.8 per cent.
RY STOCK PERFORMANCE
The impact of the coronavirus on Canada’s financial sector reflects on the S&P/TSX banking index, which is down nearly 15 per cent this year. Royal Bank of Canada stocks also register a decline of 7.3 per cent year-to-date (YTD).
But since taking a steep fall amid the market bottom-out in March, its scrips rebounded over 10 per cent in the last six months and about 2.5 per cent in three months.
RY FINANCIAL RESULTS
Royal Bank of Canada’s net income of C$ 3.2 billion for the third quarter ending 31 July 2020 was down two per cent year-over-year (YoY). However, the Q3 2020 net income was up 157 per cent quarter-over-quarter (QoQ), majorly due to reduced provision for credit loss (PCL).
Its PCL in the latest quarter stood at C$ 675 million, with its PCL ratio on loans down 125 bps QoQ.
The Toronto-based bank recorded a total revenue of C$ 12.9 billion in Q3 2020, a significant increase from C$ 10.3 in Q2 2020.
Enbridge Inc (TSX:ENB)
Current Stock Price: C$ 38.17
While major Canadian energy companies such as Suncor Energy (TSX:SU) cut down its dividends due to the pandemic-inflicted strains, Enbridge continued to distribute a quarterly dividend of C$ 0.81. It currently has a dividend yield of 8.48 per cent, as per the TMX data.
Enbridge Inc continues to trend on the TSX among stocks with high dividend yield. It has been one of those companies that managed to hold steady despite the extensive disruptions due to the pandemic and continued to secure a steady cash flow from ongoing operations.
ENB STOCK PERFORMANCE
Severely beaten by the coronavirus pandemic, Canada’s oil and gas sector posts a YTD decline of nearly 54 per cent on the S&P/TSX energy index. Enbridge stocks are also down nearly 26 per cent so far this year.
However, since nosediving to C$ 34.09 (March 19) amid the pandemic-triggered market crash, its lowest level this year, Enbridge scrips climbed nearly 11 per cent in the following seven months.
In the last 10 days, the energy stock secured an average share trading volume of 5.6 million.
ENB FINANCIAL RESULTS
Enbridge Inc’s total operating revenue in the second quarter ending 30 June 2020 dropped to C$ 7.9 billion, from C$ 13.2 billion in Q2 2019. Its earnings of C$ 1.7 billion and operating income of C$ 2 billion in Q2 2020 were also significantly down YoY. The Calgary-based company’s total operating expenses of C$ 5.8 billion in the latest quarter was also lower from C$ 10.9 billion in Q2 2019.
Enbridge Inc’s recorded an EBITDA of C$ 2.3 billion in the second quarter of 2020. Its cash, cash equivalents and restricted cash stood at C$ 497 million at the end of June 2020.
The C$ 77.3-billion market cap company’s price-to-book (P/B) ratio is 1.31 per cent, price-to-cash flow (P/CF) ratio is 7.8 and debt-to-equity (D/E) ratio is 1.14, as per the data available on the TMX. Its current return on equity is 3.18 per cent, while its return on assets is 1.16 per cent.
