Royal Bank of Canada (TSE:RY) has announced that it will be increasing its dividend from last year's comparable payment on the 24th of February to CA$1.48. Even though the dividend went up, the yield is still quite low at only 3.3%.

Check out our latest analysis for Royal Bank of Canada

Royal Bank of Canada's Earnings Will Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end.

Royal Bank of Canada has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but Royal Bank of Canada's payout ratio of 50% is a good sign as this means that earnings decently cover dividends.

Over the next 3 years, EPS is forecast to expand by 3.2%. The future payout ratio could be 46% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Royal Bank of Canada Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the annual payment back then was CA$2.84, compared to the most recent full-year payment of CA$5.92. This works out to be a compound annual growth rate (CAGR) of approximately 7.6% a year over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

Royal Bank of Canada Could Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Royal Bank of Canada has been growing its earnings per share at 5.1% a year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

We Really Like Royal Bank of Canada's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 11 Royal Bank of Canada analysts we track are forecasting continued growth with our free report on analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.