Investing in stocks that pay dividends can be a smart way to create a stream of income, especially when the economy feels a bit wobbly. Royal Bank of Canada (TSX: RY) is often seen as a dependable choice if you’re looking for consistent dividend payouts. With a strong financial base and a long history of sharing profits with its investors, Royal Bank stock could be your ticket to earning some nice annual income.
Image source: Getty Images
Creating that income
As of writing, Royal Bank stock trades around $161 per share. The bank sends out a dividend cheque four times a year, and right now, it’s $1.48 per share each quarter. That adds up to $5.92 per share over a whole year. If you want to earn $2,000 every year just from these dividends, here’s how that shakes out.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
| RY | $161 | 338 | $5.92 | $2,000.96 | quarterly | $54,418 |
Now, that’s a major investment of $54,418 for $2,000 in annual income. Yet Royal Bank stock’s dividend yield, which is the annual dividend amount as a percentage of the stock price, is about 3.69% at writing. The bank also has a payout ratio of around 46%. This number tells us that the bank is paying out a reasonable chunk of its profits as dividends but is still keeping enough money to run the business smoothly and invest in future growth. A healthy payout ratio suggests that the dividend payments are likely to continue. It’s not overstretching themselves to pay out dividends.
More growth to come
Looking at the first-quarter earnings report for 2025, Royal Bank stock reported a net income of $5.1 billion. That’s a whopping 43% increase compared to the same period last year! The bank’s return on equity, which shows how well it’s using shareholders’ investments to make a profit, was a solid 16.8%. Plus, the common equity tier-one ratio, a measure of the bank’s financial strength, stood at a comfortable 13.2%. These figures paint a picture of a financially healthy bank that’s capable of continuing to provide value to its shareholders through dividends.
Royal Bank stock isn’t just one type of business. It’s involved in a few different areas, including personal and commercial banking, wealth management, capital markets, and insurance. This variety helps to make the bank more resilient, as different parts of the business might do well at different times. Also, their recent purchase of HSBC Bank Canada has made it even bigger and give it more customers. It’s like it’s added another strong player to the team.
For those investors who like the idea of their dividends helping them buy even more shares, Royal Bank stock offers a dividend-reinvestment plan, or DRIP. Instead of getting cash, your dividend payments are used to automatically buy more Royal Bank stock. Over time, this can really boost your overall returns, thanks to the power of compounding. It’s like your dividends are working to make you even more dividends! This strategy can be especially helpful if you’re planning to hold onto the stock for the long haul.
Bottom line
While every investment comes with some level of risk, Royal Bank stock’s consistent track record, strong financial numbers, and commitment to rewarding shareholders make it a pretty attractive option if you’re focused on generating income from your investments. By owning around 338 shares, investors could aim to receive about $2,000 in dividends each year, providing a steady income stream that isn’t as tied to the day-to-day swings of the market. It’s like having a reliable income stream flowing into your account.
