In the past, Canadians targeted about $1 million of retirement savings. After many years of inflation, especially with today’s relatively high inflation, that amount may not be enough anymore. Instead, a new retirement target may be $1.7 million.
Here are a few of the best Canadian stocks that could help you reach the new goal. Over the last 10 years, an equal-weight portfolio in the three stocks resulted in total returns of about 16.77% per year. If you’re able to achieve this rate of return and invest $10,000 each year, you will arrive at $1.7 million in about 21 years.
A&W
A&W Revenue Royalties Income Fund (TSX:AW.UN) earns royalty income from A&W locations across Canada. The number of locations increased by 2.1% last year to 1,015. The same-store sales growth is a performance metric that investors should keep an eye on.
Last year, its same-store sales growth was down from 2021’s 14% but still positive at 7.4%. The gross sales of the A&W restaurants in the royalty pool was up 10.8% year over year to $1.7 billion. This also led to royalty income growth of 10.8% to $52.2 million.
After expenses, including general and administrative costs and interests, its distributable cash generated only rose 6.4% to $38.6 million. And because the number of units increased, ultimately, distributable cash generated per unit climbed only 3%. The 2022 payout ratio was 96.6%.
A&W may be able to benefit from a relatively high inflation rate by increasing the prices on its menu. If you like monthly income, you might be interested in researching A&W, which offers a yield of about 5.2% at writing.
goeasy
goeasy (TSX:GSY) is a non-prime consumer lender in Canada. Currently, the non-prime market consists of approximately $200 billion of consumer credit products. These people aren’t able to borrow from traditional means for their everyday needs. goeasy lends to and aim to help them reduce their interest rates over time. Typically, after one year, one-third of goeasy’s customers are able to get back to bank prime credit.
Last month, the federal government decided to further regulate the industry by capping the maximum allowable interest rate at 35%. In a financial services conference soon after, the goeasy chief executive officer noted that this change will hit smaller players harder and prevent new players from entering the industry.
Because goeasy is a leader in the space with more diversified offerings, it will be less affected. Over time, this change will lower its credit risk and improve the quality of its overall loan portfolio.
Other than this change, currently, investors are also concerned that we’re in a higher interest rate environment and that there’s a potential of a mild to moderate recession in the near term. So, the growth stock is on sale right now.
Brookfield Infrastructure
Brookfield Infrastructure Partners (TSX:BIP.UN) is an undervalued stock that investors can consider buying. Because it is globally diversified across various types of critical infrastructures, it has plenty of growth opportunities to pursue. It also has the expertise to optimize its assets and does have an ongoing capital-recycling program. On an annual basis, it could generate proceeds of over US$2 billion.
Management targets funds from operations growth of 6-9% annually. It has paid a healthily growing dividend since 2008 with a 10-year dividend-growth rate of 9.1%. At writing, it offers a cash-distribution yield of almost 4.6%.
