Sitting on Cash? Invest $20,000 in This Dividend Stock for $96,588 in 10 Years

This top dividend stock has quadrupled in share price in just a decade, and that could very well happen again!

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There are so many Canadians just sitting on cash right now — cash they’ve collected over the years and are letting sit on the sidelines, not doing a single thing. And that’s a huge mistake, especially right now, when it comes to long-term investing.

If you were to put $20,000 of your savings into an investment, right now is the time. The stock market is down, true. But over time, the stock market trends upwards. We’re bound to reach a growth market once more. And when it does, you should certainly be prepared.

Choose stability over excitement

It can be super exciting to find that one stock that soars above the rest — the one that you can say, “I bought it back when it was just $1,” or something. However, these are exciting stocks that tend to be devastating when they fall. Instead, a stable dividend stock is likely a better answer.

In that case, you want to look at company history. That means companies that have been around for decades and actually have a history to look at. But it also means looking at their performance, not just when times are good, but when times are bad as well.

That’s why I would recommend dividend stock Canadian Tire (TSX:CTC.A).

From bad to worse

Canadian Tire stock proved that it can handle recessions, including the Great Recession. It also proved it can survive in a pandemic and even thrive. While the rest of the world dealt with supply-chain issues, Canadian Tire stock was able to store its products on hand in its own warehouses.

Further, the dividend stock managed to see an increase in sales thanks to its e-commerce arm. Curbside pickup became huge for the company and allowed it to come out the other side relatively unscathed.

Today, Canadian Tire stock is a steal, in my books. It trades at just 9.56 times earnings and offers a dividend yield at 4.07%. Shares are down 3% in the last year, soaring upwards by 19% year to date.

What $20K can get you

If I have $20,000 set to invest in one company, Canadian Tire stock is certainly a top choice. In the last decade alone, shares have climbed 207% as of writing. That’s a compound annual growth rate (CAGR) of 11.85% as of writing. Further, its dividend has increased by a CAGR of 17.51% in that time!

Taking this together, let’s look at what $20,000 could get you in another decade by reinvesting dividends along the way.

YearShares OwnedAnnual Dividend Per ShareAnnual DividendCompound FrequencyAfter DRIP ValueYear End Shares OwnedYear End Stock PriceNew Balance

As you can see, you’ll almost reach $100,000 in your portfolio in just a decade at this rate! Even without adding another penny. That shows how buying a dividend stock at the right time could create incredible income for your future, even during a downturn.

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 Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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