Got $1,000? Buy These 2 Stocks and Hold Until Retirement

Whether you plan to invest for the next three to five years or through retirement, these stocks could be good choices.

| More on:
Path to retirement

Image source: Getty Images

We’re experiencing high inflation and rising interest rates, which increase our living expenses and borrowing costs. It’d be smart to lower one’s level of debt to reduce interest expenses. Particularly, focus on paying off high-interest debt like credit cards.

Additionally, in a world of inflation, a dollar today is worth less than a dollar yesterday. Therefore, if you’ve got an extra $1,000 you don’t need, you should consider investing it for satisfactory returns — returns that will counter inflation and at least maintain your purchasing power.

According to Statistics Canada, the recent inflation in Canada based on the Consumer Price Index were the following:

  • June: 8.1%
  • July: 7.6%
  • August: 7.0%

So, we may be in a period of disinflation, where the inflation rate is still positive but slowing down. The latest data of 7% inflation in August is still way too higher versus where our central bank, the Bank of Canada, wants it to be. The Bank of Canada would like inflation to be 1-3%.

Consequently, more interest rate hikes are expected to come, which could weigh on stocks, as lower-risk fixed-income securities will be better competitors for investors’ money.

With the above in mind, you would want stocks that can deliver returns of at least 8%. This is also a good initial target for long-term returns. Remember that you can get this return through a mix of dividend and price appreciation. Here are a couple of stocks that can help you meet or beat inflation for the long haul!

Savaria stock

As a designer, manufacturer, and distributor of accessibility products for use in home and public spaces, Savaria (TSX:SIS) knows the aging population market it serves very well. It’s a global company that distributes to 40 countries around the world.

Marcel Bourassa, the president and chief executive officer of Savaria, noted that “the population of people aged 65 and over is growing faster than any other age group, and by 2030, it’s expected that 1.4 billion people will be 60 or older.” Therefore, Savaria should benefit from a growing aging population over the next decade or so.

The company is subject to merger and acquisition risk and foreign exchange risk. However, the stock has sold off, and its valuation has come down, which makes it more attractive for long-term growth. Specifically, the stock has declined about 38% from its 52-week high. The 12-month analyst consensus price target represents 58% near-term upside potential.

The industrial stock also boosted investors’ confidence by raising its dividend by 3.8% this month. At about $14 per share, it offers a 3.7% dividend yield. The dividend hike isn’t as eye popping as its 10-year dividend-growth rate of 16.9%, as management balances capital allocation for debt repayment and suitable investment opportunities.

Savaria could experience its next leg of growth over the next few years, as it targets revenue of over $1 billion by the end of 2025.

Another dividend stock that requires less conviction is Bank of Nova Scotia (TSX:BNS)(NYSE:BNS).

BNS stock

The big bank stock provides stable income from its big dividend already. The dividend stock has sold off 25% from its 52-week high, which pushed its dividend yield to tempting levels of close to 5.9%. After locking in this safe yield of 5.9%, investors would only need a 2.1% price appreciation each year from the stock to achieve a total return of 8%.

In the last 10 years, BNS stock delivered price appreciation of 2.8% annually — and this was after the recent selloff. As the big bank was able to increase its earnings per share by more than 5% annually in the last decade, it’s highly likely it can provide price appreciation of over 2.1% annually, going forward, driven by earnings growth.

The Foolish investor takeaway

Savaria can provide much higher returns than 8% per year over the next few years, but its stock is also more volatile than BNS. In contrast, BNS stock is lower risk and should be a smoother ride for returns of at least 8% per year over the period.

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 Kay Ng has a position in Savaria. The Motley Fool recommends BANK OF NOVA SCOTIA. The Motley Fool has a disclosure policy.

More on Dividend Stocks

calculate and analyze stock
Dividend Stocks

Got $1,000? 3 Dividend Stocks to Buy and Hold Forever

Dividend stocks like Restaurant Brands International (TSX:QSR) can pay substantial amounts of passive income.

Read more »

Question marks in a pile
Dividend Stocks

Where Will Brookfield Infrastructure Partners Stock Be in 5 Years?

Brookfield Infrastructure Partners (TSX:BIP.UN) kicked off 2024 with a bang. Where will it be in five years?

Read more »

Dividend Stocks

Golden Years Gain: Your CPP Benefits at Age 70

CPP users delaying pension payments until 70 will receive substantial monthly income streams in the golden years.

Read more »

data analytics, chart and graph icons with female hands typing on laptop in background
Dividend Stocks

3 Dividend Stocks You Can Safely Hold for Decades

Top TSX dividend stocks are on sale.

Read more »

Dividend Stocks

Where Will Canadian Utilities Stock Be in 5 Years?

Canadian Utilities (TSX:CSU) is a classic example of a stock where the dividend is all you get. Can the company…

Read more »

Man holding magnifying glass over a document
Dividend Stocks

2 Stocks I’m Watching for Big Passive Income

Consider Bank of Nova Scotia (TSX:BNS) and another top passive-income play to power your dividend portfolio!

Read more »

Target. Stand out from the crowd
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

These top TSX stocks have increased their dividends annually for decades.

Read more »

bulb idea thinking
Dividend Stocks

2 Supercharged Dividend Stocks to Buy if There’s a Stock Market Sell-Off

These two top stocks offer attractive yields, have reliable operations and are dividend aristocrats, making them two of the best…

Read more »