Royal Bank of Canada
Market cap: $61.8 billion
2011 revenue: $28 billion
P/E ratio: 9.2
Dividend yield: 5.1%
Ticker: RY

Not so long ago, bank stocks were among the most stable sources of income for dividend-oriented investors. Then came the crisis, which forced Citigroup, Bank of America, and others to slash or eliminate their generous payouts. BofA used to pay $2.56 a share. Today it pays 4¢.

What's a bank stock investor to do? Look north of the border. Canada's banking system emerged from the meltdown relatively unscathed thanks to better regulation. It had stricter capital requirements than the U.S. Today, even after American banks have built up their equity, RBC has a so-called Tier 1 Capital Ratio of 13.2%, vs. an 11.1% average for the top 10 U.S. banks.

Canadian mortgage lending is conservative. Homebuyers are required to purchase mortgage insurance on any home loan with a loan-to-value ratio greater than 80%. (RBC's loan-to-value ratio on uninsured mortgages is only 50%, a key cushion should Canadian home prices tumble.) And Canadian mortgages are full recourse: Lenders can do more than foreclose; they can pursue a borrower's other assets too. That discourages Canadian homebuyers from borrowing more than they can afford.

RBC is Canada's largest bank, which is meaningful considering that Canada's 2.4% GDP growth rate is double that of the U.S. It pays a 5.1% dividend yield that is well supported by earnings, which rose 13% in the third quarter. (The current payout ratio is 57%.) Canadian loan volume grew 6% and deposits 9%.

RBC's big strategic push has been to more than double income from asset management by 2015. So far, so good: Asset management profits are up 26% over the nine months ended July 31, and Canada RBC has quickly captured 25% of all sales of long-term mutual funds. "The Canadian economy has been very strong, and RBC has a stable management team that makes few errors and has assembled a very good portfolio," says Paul Atkinson, comanager of the Aberdeen Global Financial Services fund, which owns 100,000 RBC shares. "There's a lot to like."

This article is from the December 26, 2011 issue of Fortune.
By Jon Birger, contributor @FortuneMagazine - Last updated December 13 2011: 2:08 PM ET
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