It’s very possible for the average Canadian to retire as a millionaire, provided they just do a couple of things right.
Starting early is imperative. Someone who invests $2,000 per year from ages 18-25 will end up with a bigger nest egg than someone who invests $2,000 each year from 25-65. Most university students don’t have a bunch of money kicking around to invest, but too often money from that first job out of school goes towards wasteful spending when it could easily be put away for a brighter future.
The other thing an investor needs to do is invest in some of Canada’s finest stocks, and do so at reasonable prices. It might be tempting to pay 30 times earnings for the growth stock du jour, but that’s likely to turn out poorly. Instead, investors should focus on high quality companies with a history of growing dividends, with strong and sustainable competitive advantages, and that are relatively cheap.
Here are three that meet those criteria.
Shaw Communications
Shaw Communications Inc. (TSX:SJR.B)(NYSE:SJR) has a great moat in a couple of ways. It essentially shares the home phone, internet, and television market in western Canada with Telus, becoming so entrenched that other competitors don’t even bother straying east of the Ontario border. Shaw is also becoming a preferred internet provider because of its network of WiFi hotspots.
Like everyone else in the cable television sector, Shaw is facing pressure from folks who cut the cord and moved away from traditional television service. This means higher bills for those of us who keep cable, leading to slight revenue gains in the division annually. It’s good to invest in a business with that kind of pricing power.
Shaw is investing for the future is with its internet service. It’s spending extensively to make sure more customers have access to faster speeds, an option which costs $20-50 per month more than basic packages. It also has invested in a network of 45,000 hotspots that give internet customers access to fast and secure WiFi on the go. Judging from the recent uptick in internet subscribers, the hotspots are proving popular.
The company also pays a 4.11% dividend and has grown that dividend by more than 10% annually over the last decade.
Bank of Nova Scotia
Out of all of Canada’s banks, my favourite right now is probably Bank of Nova Scotia (TSX:BNS)(NYSE:BNS), and that’s mostly because of the firm’s international exposure. Just 35% of its recent quarterly profit came from its Canadian operations, with the remainder coming from Latin America, Asia, and the U.S. That’s the kind of diversification I like to see.
And yet, it still has great Canadian operations. It has quietly become the second-largest lender in the country, surpassing a 15% market share with its acquisition of ING and its continued cooperation with Canada’s mortgage brokers. It also partnered with Canadian Tire by buying a stake in the company’s financial services division. These are solid moves that are likely to pay off for years to come.
And Bank of Nova Scotia also offers investors a stellar history of dividend growth. Since 2010, dividends have grown 7% annually, and the company’s payout ratio is still under 50%. Its current yield is 4.3%.
Restaurant Brands International
The new reincarnate of Tim Hortons might have a funny name, but investors will likely be pretty happy with exposure to Canada’s coffee and donut giant through Restaurant Brands International Inc. (TSX:QSR)(NYSE:QSR).
Tim Hortons practically controls the coffee market in Canada, and still has loads of potential to expand in the U.S. market. But Burger King, the other part of the marriage, is no slouch either. Burger King is the fifth-largest fast food restaurant in the U.S. in terms of sales, and is making some serious headway in markets like China, South Korea, and Turkey. The company is also entering India and opened its first store in the country in 2014. There’s still loads of potential for the chain to expand to new places, taking certain items from Tim’s with it.
