The goal to growing one’s passive income over time is a noble one. For those entering retirement or nearing those golden years, adding a great dividend-paying stock to one’s portfolio is always a good idea. In this article, I’m going to highlight one bank stock I think is worth a look right now — Royal Bank of Canada (TSX:RY)(NYSE:RY).
Royal Bank really doesn’t need an introduction. Canada’s largest company by revenues, profit, and market capitalization, Royal Bank has proven to be a long-term winner for those seeking defensive income and growth. Indeed, this bank’s relatively steady long-term growth track record is noteworthy.
As we battle uncertainty and higher rates, this bank stock could help add defensive passive income over time. Here’s why Royal Bank stock is one all investors should look at right now.
Plans to raise dividend and buy back shares
Via strong earnings and a positive outlook moving forward, Royal Bank has put forward a plan to raise its dividend, and increase its share-repurchase plan. While earnings may not have met some investors’ expectations, in this market, any company that can maintain this kind of profitability at scale is likely to grab attention.
Currently, Royal Bank stock yields 3.3%, a reasonable yield but one that doesn’t scream passive income. I expect this dividend to climb over time, alongside the company’s profitability and cash flows. Share repurchases also stabilize the company’s stock price and provide a long-term investing thesis for this stock.
Like its peers in the Big Six, Royal Bank’s dividend hikes aren’t unexpected. However, this lender’s size and scale of operations is what many long-term investors like. Accordingly, those seeking defensive yields above 3% don’t have much better options than this bank stock.
Robust business model
RBC is one of the top choices among bank stocks ion TSX, as the size, dominance, and global popularity of this stock eclipses its peers. This company’s solid growth-oriented business model and diversified earnings are a big selling point.
RBC has a strong presence in the personal and commercial banking field along with the capital market business. Moreover, the company operates a prominent wealth management franchise of Canada. This bank comes with a geographically diverse presence across various financial centres of Asia, Europe, and the United States. Additionally, RBC is looking at streamlining its services using AI and digital banking.
These key catalysts provide a pathway for growth as well as passive income growth over time.
Bottom line
Indeed, there are few better options for long-term investors seeking passive income to consider in this market. Royal Bank remains a diversified way to play a growing North American economy. Additionally, this company’s business model actually benefits from rising interest rates. Accordingly, those concerned about this potential headwind will like how Royal Bank is positioned.
