I'd Put $7,000 in This Canadian Bank Stock for Decades of Growth and Income

I’d Put $7,000 in This Canadian Bank Stock for Decades of Growth and Income

If there’s one safe stock that any one can buy today with zero fear, it’s this top bank stock.

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published May 30, 2025 4:10 pm EDT

When planning for the long term, many Canadian investors turn to their Tax-Free Savings Account (TFSA) to build wealth in a tax-sheltered environment. Whether your goal is a comfortable retirement, financial independence, or just watching your money grow over time, choosing the right stock can make a big difference. If I had $7,000 to invest today for growth and income, I would put it in Royal Bank of Canada (TSX:RY). Here’s why.

grow money, wealth build — Image source: Getty Images

A perfect pair

The TFSA is designed for long-term investing. You contribute after-tax money, and everything that grows inside, like capital gains, interest, and dividends, is completely tax-free. That makes it the perfect place for dividend stocks like RBC, where you not only get consistent payouts, but those dividends don’t affect your tax return. Over time, the combination of tax-free income and compounding returns can be incredibly powerful.

Now, let’s talk about why RBC is such a strong pick. It’s not just Canada’s largest bank by market cap; it’s also one of the most consistent performers in the financial world. It operates in diversified sectors, including personal and commercial banking, wealth management, insurance, investor and treasury services, and capital markets. This wide reach allows it to manage risk while still growing revenue streams in different economic environments.

The numbers

In its recent quarter ending Jan. 31, 2025, RBC reported net income of $5.1 billion, up a staggering 43% from the same period last year. Adjusted earnings came in at $5.3 billion, with diluted earnings per share of $3.77. Its return on equity hit 16.8%, a strong signal that the company is managing its capital well. It also held a common equity tier-one ratio of 13.2%, a key measure of financial strength. These numbers weren’t driven by one-off gains—they came from solid performance across all segments of the business.

A big part of that recent growth came from its acquisition of HSBC Canada, which RBC officially completed earlier this year. RBC has already captured 70% of the targeted $740 million in cost synergies and expects over $500 million in annualized run-rate savings. This deal expanded its footprint and customer base, and it’s already paying off faster than expected.

RBC’s wealth management arm is also growing quickly, with assets under management reaching over $700 billion. In the first quarter alone, wealth management revenue hit $5.5 billion, up 23% year over year. That tells me RBC isn’t just a traditional bank, it’s positioning itself as a global financial powerhouse, capable of attracting and managing massive amounts of capital across borders.

Growth and income

RBC also remains an income investor’s dream. The stock currently yields about 3.37%, and its annual dividend is $5.92 per share. Over the last 10 years, it has steadily increased its dividend, and it has one of the most reliable payout histories in Canada. In a TFSA, this income rolls in every quarter without tax consequences. If reinvested, those dividends compound over time, fuelling even more long-term growth.

The stock itself has also been climbing steadily. As of writing, RBC trades at around $177 per share, and its market cap is nearing $250 billion. Over the last year, it’s up nearly 23%. That’s impressive for any stock, let alone one as large and established as RBC. And yet, it doesn’t feel overvalued. Analysts continue to hold bullish views on the stock, noting its earnings growth, strong fundamentals, and well-executed expansion plans.

While no stock is completely without risk, RBC’s diversification, conservative management style, and global expansion make it a lower-risk option in a volatile market. It has navigated recessions, interest rate hikes, and regulatory changes, all while continuing to pay and grow its dividend.

Bottom line

Investing $7,000 in RBC today isn’t about chasing fast returns. It’s about planting a seed that could grow into something meaningful decades down the line. It’s about adding a core holding to your TFSA that provides income you can count on and capital growth that helps you stay ahead of inflation. With strong earnings, reliable dividends, and a strategy built for the long term, RBC fits the bill perfectly.