Should you buy the bank or their mutual fund?

By Kanwal Sarai
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Where to invest hand writing with a black mark on a transparentShould you buy the bank (stock) or their mutual funds? Great question and one that has already been answered by Tom Connolly recently.

Mr. Connolly reported that in 2004 the RBC Monthly Income Fund was paying out $0.56 a unit. In 2014 the disbursement grew to $0.57 per unit. Can you imagine only a $0.01 increase in ten years! Mr. Connolly goes on to say:

"You might as well call this fixed income [refering to the RBC Fund]. It's a bit more bother, but we buy quality individual dividend growth stocks for a reason…growing income. And, as the dividend rises, so does the price of the stock. We believe: fund buyers get suckered."

How does the $0.01 increase in ten years compare to owning Royal Bank of Canada (RBC) stock (RY)? Mr. Connolly concludes:

"The dividend growth on RY's stock itself, naturally, is far superior. From a $1.01 dividend in 2004 to $3.08 now. RY's dividend up 205% in ten years or 11.8% CAGR income growth. Buy the bank, not their fund."

Would you prefer a 205% increase in dividends or a 1.79% increase in disbursements? Take charge of your investments and you will reap the benefits.

Buying quality dividend paying stocks is easy and I can show you how simple it really is.

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