Royal Bank of Canada (TSX:RY) stands as a pillar of financial stability and growth in the Canadian banking sector, consistently proving its mettle through challenging and prosperous economic cycles alike. With its recent financial performance and forward-looking strategies, Royal Bank stock continues to shine as a compelling choice for investors. Especially those prioritizing dividend income.

The numbers

In its fourth-quarter earnings, released December 4, 2024, Royal Bank stock reported an impressive net income of $4.2 billion, marking a year-over-year increase of 14%. This performance was powered by robust contributions across its business segments and bolstered by the recent acquisition of HSBC's Canadian operations. The integration of HSBC's substantial Canadian client base of approximately 780,000 clients has fortified RBC's retail and commercial banking reach, thereby enhancing its market share and paving the way for additional revenue streams in the years ahead.

The bank's wealth management division also emerged as a key growth driver, contributing $969 million in net income for the quarter. This segment reflects Royal Bank stock's strategy to diversify its revenue base. Moving beyond traditional banking into areas of high-margin and sustainable growth.

Growth and dividends

Royal Bank stock has a stellar reputation for rewarding its shareholders through dividends, and 2024 is no exception. The bank announced a quarterly dividend of $1.48 per share, up from $1.42 earlier this year. This marks an annualized payout of $5.92 per share, offering a dividend yield of approximately 3.3% at the current share price. With a dividend payout ratio of 40.%, Royal Bank stock demonstrates a disciplined approach to balancing shareholder returns with retained earnings for growth opportunities.

The bank's stock performance further underscores its resilience. Over the past year, Royal Bank stock traded within a range of $127.60 to $180.45, reflecting strong investor confidence even in the face of broader economic headwinds. As of writing, the stock was trading near $177.73, approaching its 52-week high. For long-term investors, this stability is a critical factor, as it signals the reliability of Royal Bank stock as a cornerstone investment.

More to come

One of RBC's strategic advantages lies in its diversified business model, which is designed to weather economic turbulence while capitalizing on growth opportunities. Beyond its traditional banking services, the bank has aggressively expanded into wealth management, capital markets, and insurance. Its recent acquisition of HSBC Canada has further broadened its asset base, strengthened its lending portfolio, and positioned it for greater profitability. Analysts expect these initiatives to contribute meaningfully to earnings growth over the next several years.

Looking ahead, RBC does face challenges, particularly in the form of rising loan loss provisions. For the most recent quarter, the bank allocated $840 million to cover potential loan defaults. While this may weigh on short-term earnings, it also highlights Royal Bank stock's proactive risk management

For dividend-focused investors, Royal Bank stock's track record speaks volumes. The bank has consistently raised its dividend over the past decade, reflecting a commitment to shareholder returns that is unmatched among its peers. Coupled with its strong financial performance, stable payout ratio, and reliable dividend growth, Royal Bank stock offers a compelling case for those seeking steady income. Its current yield of 3.3% may not seem extraordinary. Yet the stability and growth potential behind that yield make it a standout in a low-interest-rate environment.

Bottom line

So, is Royal Bank stock a buy right now? For investors focused on dividends, stability, and growth potential, RBC certainly fits the bill. Its recent financial performance, combined with its attractive dividend yield and strategic initiatives, makes it a solid option for both income-seeking and growth-oriented portfolios. While its valuation is nearing the higher end of its historical range, the bank's robust fundamentals and promising outlook suggest that it remains a worthwhile investment, particularly for those with a long-term perspective.