For those who are trying to figure out what stocks to select for this coming year, the good news is that there are a lot of excellent names available with above-average dividends and/or above-average long-term capital appreciation potential. In order for investors to retire multi-millionaires, they would need to save and invest $10,000 per year and make a compounded annual return of 10% of a 32-year period. For investors with a little more talent and/or luck, a 12% return would mean working only 28 years to retire with $2 million.
Although the numbers seem very simple, the reality is that the investments that fit this mould are always very difficult to find. In spite of this, a challenge remains something to be embraced. Here are four names that investors will need to become rich.
After a recent pullback, shares of Canadian National Railway Company (TSX: CNR)(NYSE: CNI) are trading at less than $100 per share and pay investors a dividend close to 2%, as the railway operator may face headwinds if the U.S. and Canada cannot resolve the NAFTA situation in a timely manner. In spite of the potential for lower profitability for the short term, investors need not forget that sometimes great companies go on sale.
The second name on the list is none other than Canadian Imperial Bank of Commerce (TSX: CM)(NYSE: CM), which, at a current price of $122 per share, pays a dividend of 4.25%. After watching the share price grow at a rate of 7.8% in addition to the dividend yield, investors have the opportunity to get into the Canadian bank with the most focus on sharing its capital with its shareholders. To make things even more attractive, the Canadian juggernaut has recently completed the acquisition of a U.S.-based wealth management firm, which will translate to higher profits down the road.
In the utility sector, shares of Algonquin Power & Utilities Corp. (TSX: AQN)(NYSE: AQN) currently pay a dividend of almost 4.5%, as the price of power continues to increase across the globe. With winters getting colder, the long-term gains will go far beyond the dividend payments alone. Over the past five years, shares have increased at a CAGR of 12.6% in addition to the dividend.
The last name on the list is U.S.-based Chipotle Mexican Grill, Inc. (NYSE: CMG), which is at a current price of US$325. After close to two years of catastrophe, the company has finally found a new normal, and shareholders are starting to recognize that there is profit after the storm. With a company still in growth mode, only time will tell just how much this name can run.
Although a bull market is well underway, investors with a long time horizon need not worry about market cycles, instead focusing on long-term, quality names.
