Riding The Royal Bank Of Canada To New Heights

As we continue to watch the banks here in The United States implode from the inside, I have been looking north for quite some time now to Canada for financial stocks that are actually worth owning. My favorite from the great white north is The Royal Bank Of Canada stock symbol (RY).


In my opinion this is one of the best, and safest picks out there in the financial sector right now. Not only is the Canadian dollar just killing the American dollar, but the subprime mess has hardly effected Canada, if anything it has actually help them. With the stronger dollar Canadian companies like The Royal Bank Of Canada can make acquisitions inside the United States and around the world for much, much cheaper than they could have years, or even months ago. Royal Bank Of Canada is taking advantage of this already by purchasing a Caribbean bank and Alabama National BanCorporation recently.

Not to mention, that juicy 3.65 dividend yield is payable in Canadian dollars so investors here in The States reap the benefits of a strong loony through the dividend payments! This is a company that consistently raises it's dividend and is all about creating shareholder wealth while growing the company core business at conservative pace.

As if that weren't enough reason to own (RY) they just announced that they will be buying back 1.6% or 20 millions shares of the company. This should provide a nice downside protection against any kind of negative price movement in the stock.

Royal Bank Of Canada is also one of the most respected corporations in Canada, and does a ton of work for it's communities and the environment, so you can even sleep well at night knowing you own this one... Overall, I would say this is one of the safest picks I have made so far and one of the best long term investments out there, but I would be slightly cautious going into their earnings report on 11-30-07. My suggestion would be to buy some here, and buy some after earnings this way you don't get burned if there is something in the quarter that investors don't like...

For more about Royal Bank Of Canada visit their website here or to learn more about why a good dividend like the one this company has is so important click here!

As I write this article Royal Bank Of Canada is trading at $57.77

Floating Your Way Into A River Of Cash

The float of a stock is another important factor that can help you make a proper decision when it comes to picking a winning stock. The float is simply how many shares there are available for trade on the open market. Most finance sites will give you this information if you dig just a little. The float is a crucial thing to consider, because it is part of the equation that gets you to the earnings per share. (Net Income/Number Of Shares Or Float = Earnings Per Share)

Remember how important the EPS or Earnings Per Share is too, as it drives the most basic stock equation (EPS * Stock's Multiple = Price). Generally, I believe that the smaller the float the better. It breaks down to simple supply and demand. If a stock has a small float and gets a piece of great news they will go up a lot faster then one with a large float, simply because there isn't very many shares out there to buy. Watch out though because this can also work the opposite way. Check out what happen to VDSI which has only 37 million shares of float after it missed earnings estimates, just painful!

This is also were buybacks and stock splits come into play. A company that has passed it's growth phase needs to increase it's EPS somehow, so it simply starts reducing it's float by buying back it's own shares. The less shares on the market the easier it is to raise your Earnings Per Share and keep the shareholders happy! Take a look at Boeing (BA), they just announced a big buyback and the stock was rewarded.

Now when a stock split occurs you are normally just increasing or rarely decreasing the float. Lets say you have a 2 for 1 split. If the float was 50 million before the split it is now 100 million or if it was 10 million before now it is 20 million... just that simple!

Here are a few basic companies to look at that have a small float...

Cogent (COGT) 94 million shares, Vasco Data Securities (VDSI) with 37 million shares, Ormat (ORA) with 38 million shares, Zoltec (ZOLT) with only 29 million shares of float!

Compare that to some of the bigger companies out there, Microsoft (MSFT) with 9.3 billion, Motorola (MOT) with 2.2 billion and General Electric (GE) with a whopping 10.2 billion!

Basically, it is a lot easier to move a stock that has a small float, not only that, but a stock with a small float has a lot of room to grow, which is always a good thing when you are looking for great long term investments...

Picture Taken By Paul Clos