Summary
Royal Caribbean has made returning cash to shareholders a focal point in recent years.
In addition to the competitive yield, the stock appears to be trading at a discounted valuation.
We believe Royal Caribbean shares are undervalued relative to the company's future growth potential.
Written by Josh Arnold for Sure Dividend
Royal Caribbean Cruises (RCL) has had a fairly uneventful 2018 thus far. The stock has traded in a narrow range after significant gains in years past, including a nearly 50% increase last year. The company continues to benefit from favorable cruise line industry fundamentals and has also been putting in its own work to ensure a bright future. Its yield is also now as high as it has been in the past decade as management has become more shareholder-friendly, returning greater amounts of excess cash to investors.
Royal Caribbean has traded with a relatively modest valuation of late, which is part of the reason why the yield has risen to 2.5%. Investors fear the years-long bull run in cruise line stocks is nearing an end, but given the favorable outlook for bookings and pricing in 2019, we see these fears as overblown. As such, we believe Royal Caribbean stock could offer investors strong total returns compared to the average consumer cyclical dividend stock.
