Dreaming of early retirement is normal, but the goal to retire 10 years earlier than 65 is quite ambitious. Do you know what it takes to embark on this goal? It’s entirely feasible if you can save chunks of money or up to 30% or more of your income.
Assuming you’re 25 years old today and life expectancy is 90, you will then invest all your savings in dividend stocks to build a nest egg that could last 35 years.
Dividend aristocrats like Enbridge (TSX: ENB)(NYSE: ENB) and Cineplex (TSX: CGX) are your investment options. With an average dividend yield of 6.77%, your investment could double in less than 11 years.
Blue-chip stock
Blue-chip Enbridge is the go-to stock of retirement planners because of its dividend streak of 23 years. The lengthy track record is a sign of dependability and reliability. You won’t worry about taking a significant position in this $99.5 billion oil and gas midstream company.
The oil pipeline industry to which Enbridge belongs is an enduring business. Besides, the company is not a producer, but a mover or transporter of oil in Canada and selected states in the U.S. The nature of its operations in generally recession-proof, which is what you need to safeguard your growing retirement savings.
Enbridge yields 5.75%, and at this rate, a $100,000 investment could be worth $707,641.28 in 35 years. The financial cushion is substantial provided you don’t expand your standard of living and get used to spending significantly less than what you earn.
Business transformation
Entertainment and media company Cineplex has a dividend streak of eight years and is a cash cow with its 7.79% yield. The business, however, is not as unwavering as that of Enbridge. This famous Canadian brand is facing serious challenges, particularly from online video streaming companies.
At first glance, Cineplex appears to be losing out. Bear in mind, however, that the company has built a strong brand through the movie theatre exhibition business.
Today, the company is diversifying, and its efforts are paying off. The weakness in its Film Entertainment and Content segment is offset by the growing revenue from the Media and Amusement and Leisure segments.
In due time, expect Cineplex to transform into a leading entertainment company fully. Based on the current run-rate, the company is on track to match last year’s revenue and net income. Health cash flows will return to sustain the dividend payouts.
Points to ponder
Early retirement is a pipe dream, but not impossible. Using the assumptions above, you’re cutting down your investment period by 10 years. If you’re saving $1,000 a month to retire at age 65, you would need to save twice as much to retire at 55.
Hypothetically, if you invest $100,000 each in Enbridge and Cineplex, and assuming the yield holds for the next 35 years, your next egg would be $2,088,809.31. The amount could even last a lifetime with restrained spending.
The concept of retiring at age 55 is simple, but entails financial discipline. But it would be challenging to save more money and realize its compounded growth with a reduced time frame. If you’re willing to make sacrifices and go all the way, proceed and enjoy your early retirement.
