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Estimates have been rising significantly higher for Royal Bank of Canada (RY - Free Report) after the company delivered better than expected results for its first quarter.

It is a Zacks #1 Rank (Strong Buy) stock.

Based on consensus estimates, analysts project 14% EPS growth this year and 7% growth next year. On top of this, the company pays a dividend that yields a stellar 4.1%. Valuation is attractive too with shares trading at just 11.7x forward earnings.

Royal Bank of Canada, or RBC, is Canada's largest bank. It provides retail and commercial banking, wealth management services, insurance, corporate and investment banking and transaction processing services around the globe.

The company was founded in 1864 and is headquartered in Toronto. It has a market cap of $82 billion.

First Quarter Results

RBC reported better than expected results for the first quarter on March 1. Earnings per share came in at $1.23, beating the Zacks Consensus Estimate of $1.11. This was down from $1.31 is the same quarter last year mainly due to lower trading results in the Capital Markets segment. But it was up from $1.05 in the prior quarter.

The company's Canadian Banking segment saw net income growth of 7% year-over-year due to strong volume growth across most businesses and improved credit quality.

Return on equity was down year-over-year but still a stellar 20.0%.

Increase in Estimates

Following solid Q1 results, analysts revised their estimates significantly higher for both 2012 and 2013, sending the stock to a Zacks #1 Rank (Strong Buy).

The Zacks Consensus Estimate for 2012 is now $4.98, representing 14% growth over 2011 EPS. The 2013 consensus estimate is currently $5.34, corresponding with 7% growth.

Many analysts expect RBC to continue generating strong core earnings from its Canadian Banking, Insurance and Wealth Management segments, although the Capital Markets division may continue to fluctuate due to volatile trading revenue.

Increase in Dividend

RBC also announced a 6% increase in its quarterly dividend on March 1. It currently yields a solid 4.1%, or about twice what you'd get on a 10-year U.S. Treasury note.

Reasonable Valuation

Shares trade at just 11.7x 12-month forward earnings, above the industry median of 9.4x but certainly not unreasonable given the company's above-average growth projections. It has historically traded at 12.3x forward earnings.

Its price to book ratio of 2.2 is also above the peer group but slightly below its 10-year median of 2.3.

The Bottom Line

With rising earnings estimates, solid growth projections, a juicy 4.1% dividend yield and reasonable valuation, Royal Bank of Canada offers attractive total return potential.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Co-Editor of the Reitmeister Value Investor.

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