When we talk about low-risk stocks, the first thing that pops into our mind is lower returns as the risk and return are positively correlated. The higher the risk, the more significant is the gain or loss. However, have you ever wondered that a stable dividend-paying stock could also make you very rich that too at a low risk?
Here we’ll take a look at two TSX Dividend Aristocrats that could help preserve your capital and have the potential to make you a millionaire. All you need is a strict discipline to invest regularly and patience to stay invested for a longer term.
Canadian utility giant
Shares of the Canadian utility giant Fortis (TSX:FTS)(NYSE:FTS) is among the best low-risk investment options that could make you rich. Fortis is one of the TSX’s safest bet with almost all of its earnings coming from the regulated utility assets.
The company has a stellar history of consistently raising its dividends for 47 years. Apart from its robust payouts, this Dividend Aristocrat has generated stellar returns over the past several years.
Fortis has generated an average annual total shareholder return (stock price appreciation and dividend payments) of 14% in the past 20 years, implying a $1,000/month investment in its stock for the past 20 years would now be worth $1.32 million, thanks to the power of compounding.
The company’s high-quality earnings support its dividend payout and help it to expand through continued investments in renewable power, infrastructure, and accretive acquisitions. Fortis expects its rate base to increase to $40.3 billion by 2025, which is likely to drive 6% annual growth in its dividends over the next five years and help the company to continue to pursue growth opportunities.
Fortis’s low-risk profile, robust dividends, and ability to generate strong returns for investors makes it a top stock to create worry-free wealth in the long run.
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A resilient energy company
Energy infrastructure giant TC Energy (TSX:TRP)(NYSE:TRP) is another TSX-listed Dividend Aristocrat that should be on your radar to generate worry-free returns. The company generates most of its adjusted EBITDA from assets that are either rate-regulated or have long-term contracts, which continues to support its high-quality earnings.
TC Energy’s resilient business and robust cash flows help it to boost its shareholders’ returns consistently. Over the past 20 years, TC Energy has generated an average annual total shareholder return of 12%, implying an investment of $1,000 per month in its stock in the past 20 years is now worth $1 million.
While the COVID-19 pandemic significantly disrupted the energy sector and weighed heavily on the financials of the companies operating in this space, TC Energy’s high-quality assets kept it immune from the short-term volatility in commodity prices and volume throughput.
Company CEO Russ Girling said, “During the first nine months of 2020, our diversified portfolio of essential energy infrastructure continued to perform very well.” Its assets remained mostly unaffected by the pandemic, with utilization levels remaining at the historical levels.
The company is progressing well on its $37 billion secured growth program, which should support its future growth and dividend payouts.
TC Energy’s annual dividend has grown at a high single-digit rate over the past 20 years. Moreover, the company projects an 8-10% growth in its annual dividend for 2021. Further, it projects 5-7% yearly growth in its dividends beyond 2021.
Long-term investors could consider buying TC Energy stock to become rich.
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Sneha Nahata has no position in any of the stocks mentioned. The Motley Fool recommends FORTIS INC.