With markets moving quickly and financial news arriving around the clock, many investors have adopted short-term trading strategies. However, building lasting wealth is usually the result of owning high-quality businesses through multiple market cycles. Investors willing to hold strong dividend stocks for the next seven years (and beyond) can benefit from both growing income and long-term capital appreciation. Two Canadian companies that fit this approach are Royal Bank of Canada (TSX:RY) and Brookfield (TSX:BN).
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Royal Bank of Canada: A proven dividend compounder
Royal Bank of Canada (or RBC) has consistently rewarded patient shareholders. Over the past seven years, with dividends reinvested, the stock generated average annual total returns of about 20%, outperforming the broader Canadian market’s return of roughly 14.5% per year.
The bank’s $13.5 billion acquisition of HSBC Canada in early 2024 strengthened its competitive position by adding approximately 780,000 retail and commercial clients. The transaction also expanded RBC’s reach among high-net-worth and internationally connected customers while enhancing its global banking capabilities through new products, including specialized foreign currency accounts and liquidity management services.
Looking ahead, RBC appears well-positioned to continue delivering steady earnings growth. Under normal economic conditions, earnings per share could increase by about 7% annually, providing solid support for future dividend increases. That outlook is backed by an impressive 15-year dividend growth rate of approximately 7.6%, highlighting management’s commitment to rewarding shareholders.
The main drawback is valuation. At roughly $290 per share, RBC trades at a blended price-to-earnings (P/E) ratio of 18.7, around 50% above its long-term historical average. If the valuation eventually returns to more normal levels, RBC stock could experience a meaningful pullback. Investors with available cash may prefer to wait for a better entry point, but long-term shareholders should still view RBC as a high-quality core holding.
Brookfield: Growth powered by global infrastructure
Brookfield offers investors exposure to many of the world’s most essential assets. Operating in more than 50 countries, the alternative asset manager oversees over US$1 trillion in assets under management, including more than US$600 billion of fee-bearing capital.
Its ownership-driven investment strategy aligns management with clients while creating opportunities to improve businesses through operational expertise. Beyond infrastructure, renewable power, private credit, and real estate, Brookfield Wealth Solutions invests insurance premiums into long-duration, high-quality real assets that can generate attractive long-term returns.
The company is also investing heavily in infrastructure supporting artificial intelligence (AI), including data centres and power generation. As demand for digital infrastructure continues to grow, these investments could provide an additional tailwind for earnings over the coming years.
Management targets long-term shareholder returns exceeding 15% annually by growing intrinsic value per share and distributable earnings at a similar pace. Meanwhile, Brookfield has increased its dividend consistently, achieving a 10-year dividend growth rate of approximately 9.8%.
Unlike RBC, its shares currently trade at a valuation that is broadly in line with historical norms, making the stock an appealing choice for investors seeking both growth and rising dividend income.
Investor takeaway
For investors with a seven-year investment horizon, both Royal Bank of Canada and Brookfield are top-of-the-list quality dividend stocks. RBC offers stability, dependable earnings growth, and a long history of increasing dividends, although prospective buyers may want to watch for a more attractive valuation.
Brookfield combines a reasonable valuation with powerful long-term growth drivers, including infrastructure and AI-related investments.
Together, these two companies offer a blended mix of resilient income, durable businesses, and long-term wealth-building potential.
