How to Turn $10,000 Into $150,000 in 25 Years

These stocks are good examples of how investors can use the power of compounding to build wealth.

| More on:

Image source: Getty Images

The market correction is tough to watch, but it gives investors a chance to buy great TSX stocks at undervalued prices. One popular strategy for creating wealth for retirement involves building a balanced portfolio of top dividend stocks and using the distributions to acquire new shares. This harnesses the power of compounding and can turn modest initial investments into significant savings over time.

TD Bank

TD (TSX:TD) is Canada’s second-largest bank by market capitalization. The company is well known to Canadian investors for its domestic retail banking operations. However, TD actually has more branches south of the border, and the American businesses is about to expand. TD is in the process of buying First Horizon for US$13.4 billion. The deal will add more than 400 branches to the current American business and will make TD a top-six bank in the U.S. market. The existing U.S. retail banking operations contributed 29% of its reported earnings for the fiscal third quarter (Q3) of 2022.

This is important for investors who like the long-term prospects for the American economy and want to get exposure to economic growth in the country through a top Canadian stock.

TD has paid a dividend in each of the past 164 years, and the board raised the distribution by 13% for fiscal 2022. Since 1995, the compound annual dividend-growth rate is about 11%. That’s good news for investors who use the dividends to buy new shares. At the current share price of $84, the stock offers a 4.25% dividend yield. TD traded as high as $109 earlier this year.

A $5,000 investment in TD stock 25 years ago would be worth $75,000 today with the dividends reinvested.


BCE (TSX:BCE) is another top dividend stock that looks oversold right now and offers an attractive 6.3% dividend yield. The share price currently sits at $58 compared to $74 in April.

BCE gets most of its revenue from essential wireline and wireless services. Households and businesses need to have internet access and mobile phone connections regardless of the state of the economy. This makes BCE a good stock to own during an economic downturn.

BCE has the power to raise prices when its costs increase. That’s good news for investors in the current era of high inflation.

The company is spending $5 billion in 2022 on network upgrades to protect the wide competitive moat BCE enjoys while setting the business up for decent revenue and cash flow growth in the coming years. BCE is expanding its 5G mobile network and rolling out fibre optic lines directly to the premises of another 900,000 customers this year.

A $5,000 investment in BCE stock 25 years ago would also be worth about $75,000 today with the dividends reinvested.

The bottom line on top dividend stocks to buy now

TD and BCE pay attractive dividends that should continue to grow. The stocks are good examples of how investors can use the power of compounding to build wealth, and both still deserve to be core picks in a diversified retirement fund. The TSX is home to many great dividend stocks that now trade at undervalued prices and should deliver strong total returns over the coming years.

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.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker owns shares of BCE.

More on Investing

A cannabis plant grows.
Cannabis Stocks

Can Aurora Cannabis Stock Recover in 2024?

Aurora Cannabis stock is down 99% from all-time highs but remains a high-risk bet, despite its cheap valuation.

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 »

TFSA and coins

TFSA Investors: 3 Incredible Stocks for 2024

Are you looking for stocks to buy and hold for years for your TFSA? These three stocks could deliver exceptional…

Read more »

A person looks at data on a screen
Stocks for Beginners

3 Warren Buffett Stocks to Hold Forever

Warren Buffett sold some shares in Apple (NASDAQ:AAPL), and the market had questions.

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 »

A bull outlined against a field

After Earnings, I’m Bullish on These 2 TSX Stocks

Given their solid performances and healthy growth prospects, I am bullish on these two TSX stocks.

Read more »

Woman has an idea
Bank Stocks

3 No Brainer Bank Stocks to Buy Now for Less Than $1,000

Canadian bank stocks like Toronto-Dominion Bank (TSX:TD) appear quite cheap today.

Read more »