Now that their own retirements are secure, many baby boomer investors are switching to a more long-term approach. They want to create a long-term wealth fund that will provide steady income for their kids, grandkids, and even great-grandkids.
It’s a truly noble exercise, vowing to take care of future generations. This fund can help pay for much-needed home improvements for their children, a down payment on their first property for the grandkids, and a university education for their great grandkids.
Best of all, this fund can live on for decades, and investors can just spend the income it produces. It should be sustainable forever, provided you only withdraw 4% of the value of the fund each year.
Here are three great Canadian stocks to get you started, each poised to be a top performer for decades to come. Remember, you’ll want to take a long-term approach on a wealth fund like this one.
Brookfield Property Partners
Owning high-quality real estate is something that will never go out of style. Brookfield Property Partners (TSX: BPY.UN)(NASDAQ:BPY) is one of the world’s largest landlords with 143 different office properties (spanning 96 million square feet of gross leasable area) as well as 123 best-in-class malls and retail properties. These locations have total leasable area of 121 million square feet. It also buys up distressed real estate at a discount, holding it until the market recovers and then selling.
Needless to say, this company is a juggernaut. And, to top it off, it appears to trade at a pretty substantial discount today.
Shares currently trade hands at approximately $25 each. In 2018, the company generated approximately $1.1 billion in funds from operations (in Canadian dollars). The company has a current market cap in the $10 billion range. That puts us under 10 times funds from operations, which is a great value for such timeless assets.
Or, looking at it from another perspective, management currently estimates net asset value to be in the US$30-per-share range. The company’s units trade for US$19 each on the NASDAQ.
And while investors wait for the gap between price and net asset value to close, they get to collect a 7% dividend that should go up between 5% and 8% each year.
Innergex
Renewable energy is the future. There’s no doubt about that. If you’re looking to build a wealth fund that will last generations, then it’s a good idea to load up on these assets today.
Innergex Renewable Energy (TSX: INE) is the owner of hydroelectric, wind, and solar-powered energy production facilities in Canada, the United States, France, and Chile. 57% of total production comes from wind power, with 40% coming from hydro dams.
A power producer is never going to be a sexy business. But Innergex continues to post solid growth and great free cash flows. Revenue in the company’s most recent quarter was $126 million versus $101 million in the same quarter last year. Free cash flow was also up about 25% compared to last year’s results. The company has a robust pipeline of new projects planned, and it should be able to acquire assets to help encourage growth.
Innergex pays investors a solid 5% dividend — a payout that has been increased each year since 2014.
National Bank of Canada
Any good multi-generational wealth fund needs a Canadian bank stock or three. Our top banks have been outstanding performers over the last few decades, and they pay generous dividends.
One of the reasons why I like National Bank of Canada (TSX: NA) so much is its growth potential. National Bank is really only big in Eastern Canada. It has potential to grow out west as well as make international acquisitions. It has a smattering of small investments made in places like Mongolia and Cambodia, but these really haven’t moved the needle. Look for the company to make a big splash sometime soon.
And in the meantime, investors get to invest in a company trading at just 10.2 times trailing earnings and that pays a succulent 4.4% dividend. The company has increased its quarterly payout each year since 2010, giving it the longest dividend-growth streak among its peers.
