Royal Bank of Canada (TSX:RY) has long been a cornerstone of Canadian banking, and its dividend yield remains a compelling draw for many investors. For those considering it as part of a dividend-focused portfolio, there’s plenty to unpack in terms of its recent performance, historical reliability, and future outlook.
The numbers
Royal Bank stock’s financial strength was on full display in its most recent earnings. In the third quarter (Q3) of 2024, the bank posted a net income of $4.5 billion, marking a 16% year-over-year increase. This growth was supported by strong results in Personal and Commercial Banking, Capital Markets, and Wealth Management, showcasing the bank’s ability to generate robust revenue across its diverse operations. For income investors, this kind of performance underpins the confidence Royal Bank stock has in maintaining and growing its dividend payouts.
Currently, Royal Bank stock offers an annual dividend of $5.68 per share, translating to a yield of approximately 3.23% at writing. While this yield might not seem extraordinarily high, it’s crucial to consider the stability and growth history behind it. Over the past several years, Royal Bank stock has consistently increased its dividend, reflecting a steadfast commitment to rewarding shareholders. In May 2024, the bank raised its quarterly dividend by 2.9% — a testament to its enduring financial health and optimistic outlook.
Long-term value
Looking back at its dividend history, Royal Bank stock has a strong track record of reliability and growth. For over a decade, it has consistently increased its payout, weathering economic ups and downs without cutting or pausing distributions. This consistency makes it a favourite among dividend investors who value steady, predictable income. Plus, the current payout ratio of about 50% indicates that Royal Bank stock retains ample room to sustain and potentially increase dividends, even in more challenging economic environments.
From a valuation perspective, Royal Bank stock trades at a price-to-earnings (P/E) ratio of 15.57. This aligns with its historical averages and reflects its premium status within the financial sector. Royal Bank stock has also performed well in 2024, reaching a 52-week high of $176.81. This strong performance is a reflection of investor confidence and the bank’s ability to deliver on growth initiatives.
Adding to its appeal is Royal Bank stock’s proactive approach to capital management. The bank recently announced plans to repurchase up to 2.1% of its outstanding shares. Share buybacks often signal management’s belief that the stock is undervalued and represent an additional way to return capital to shareholders alongside dividends.
Foolish takeaway
Looking to the future, Royal Bank stock appears well-positioned to continue its tradition of dividend growth. Its diversified revenue streams, strong balance sheet, and commitment to shareholder returns make it an attractive option for long-term investors. While it may not offer the highest dividend yield in the market, its combination of stability, growth, and consistent payouts makes it a dependable choice — one for those looking to build a steady income stream over time. As with any investment, it’s always wise to align this opportunity with your financial goals and risk tolerance. Yet Royal Bank stock certainly holds its own as a top-tier dividend stock.
