Some stocks are built for quick trades. Royal Bank of Canada (TSX:RY) isn’t one of them. This is the kind of Canadian stock you tuck away in your portfolio and forget about, until one day you look back and realize it quietly compounded your wealth while paying you consistent dividends. Right now, Royal Bank trades around $188 per share, up more than 22% over the past year. And it continues to show why it deserves a permanent spot in long-term accounts.
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1. Earnings
The first reason to buy and hold is its earnings power. In the second quarter of 2025, Royal Bank reported net income of $4.4 billion, up 11% from last year. Diluted earnings per share (EPS) came in at $3.02, up 10%. Even adjusted for one-time items, earnings were higher by 7%.
Revenue over the last year has reached $58 billion, growing nearly 8% year over year. In a quarter where Canadian households were grappling with tariffs, rising unemployment and sluggish housing markets, RBC still delivered growth across personal banking, commercial banking, and wealth management.
2. Diversification
The second reason is diversification. Unlike smaller players, Royal Bank doesn’t depend on just one business line. Its exposure spans retail banking, wealth, insurance, and capital markets, not only in Canada but increasingly in the U.S. too.
The recent acquisition of HSBC Canada added even more depth, increasing its market share and earnings base. This wide footprint means even when one segment faces pressure, others can pick up the slack. That’s how RBC keeps its machine running smoothly across cycles.
3. Capital
The third reason is capital strength. RBC’s Common Equity Tier 1 ratio, a key measure of financial stability, sits at 13.2%, comfortably above regulatory requirements. This strong capital buffer not only protects the bank in rough times, it also allows management to return capital to shareholders with confidence. In Q2 alone, the bank returned $2.6 billion through dividends and buybacks. A new normal course issuer bid to repurchase up to 35 million shares underscores its balance sheet flexibility.
4. Income
The fourth reason is dividends. The bank just raised its quarterly dividend by 4% to $1.54 per share, which works out to a forward yield around 3.3% at writing. With a payout ratio under 50%, there’s room for more increases down the line. For long-term investors, that dividend is like clockwork, reinvested year after year and compounding into serious returns.
And when you add in RBC’s history of steady dividend growth stretching back over a century, the case gets even stronger. For now, even a $7,000 investment could bring in about $228 annually!
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| RY | $188.80 | 37 | $6.16 | $227.92 | Quarterly | $6,985.60 |
5. More to come
The fifth reason is its ability to adapt. Royal Bank isn’t standing still. At its recent investor day, management outlined plans to leverage artificial intelligence (AI) and data scale to create more value for clients, while targeting growth in U.S. fee pools. Banks often get painted as dusty, but RBC has been investing heavily in technology and digital platforms. These moves not only help defend its market share, but open up new growth paths in areas like wealth and advisory services.
Bottom line
Of course, no Canadian stock is without risk. Provisions for credit losses rose to $1.4 billion last quarter, reflecting caution over trade disruptions and weaker macro conditions. A prolonged economic downturn could pressure loan books and earnings. And while its capital markets business can produce big upside, it’s also tied to market volatility. But with scale, diversification, and a conservative risk culture, Royal Bank has repeatedly shown it can navigate downturns.
That’s why this Canadian stock isn’t about the next quarter or even the next year. It’s about holding an anchor investment that can weather storms, pay you dividends, and steadily grow over decades. Five years from now, it’s hard to imagine Canada’s biggest bank won’t be even bigger. For investors looking to simplify, Royal Bank is one of those rare Canadian stocks you can buy, hold, and quite possibly never sell.
