Is your portfolio well-diversified? Finding that perfect mix of income and growth stocks can mean the difference between working into your golden years or retiring early. Fortunately, the market provides plenty of stocks to reach that goal, including some stellar options to buy now and hold until retirement.
Here are two options to hold until retirement starting with as little as $5,000.
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Canada’s big banks can provide growth and income potential for decades
It would be near-impossible to compile a list of stocks to buy and hold until retirement without mentioning Canada’s big banks. And the one big bank that prospective investors should be looking into right now is Bank of Montreal (TSX:BMO).
In addition to a strong domestic segment, BMO boasts a growing international segment focused on the U.S. market. That focus, coupled with growing market uncertainty has led to BMO’s stock dropping 18% over the trailing 12-month period.
So then, what makes BMO one of the stocks to buy and hold until retirement? There are three key points worthy of mention.
First, Canadian banks have historically fared much better than their U.S. peers during times of uncertainty. Additionally, Canada’s big banks have emerged from slowdowns and resumed growth significantly quicker than their peers. And that growth leads me to the second point.
Earlier this year BMO completed the acquisition of Bank of the West. The California-based bank brings in over 500 branches and 1.8 million customers to BMO’s growing U.S. network. The deal also expands BMO’s coverage to 32 state markets and propels the bank into its position as the eighth-largest lender in North America.
That still-untapped growth potential will continue to feed BMO’s dividend, which is the final point to mention. BMO has been paying out dividends for nearly two centuries, longer than any other company in Canada.
As of the time of writing, that yield works out to an impressive 4.72%. Investors with $5,000 to allocate to BMO can expect to generate a dividend income of just over $230.
That’s not enough to retire on, but investors that reinvest those dividends to hold until retirement can expect that number to grow over the long term.
Buy this stock now to hold until retirement
Defensive stocks like utilities make great long-term investments to hold until retirement. Specifically, utilities provide a stable and recurring revenue stream, a handsome dividend, and an established precedent of providing annual upticks to that dividend.
And the must-have utility that investors should consider adding to their portfolios is Fortis (TSX:FTS).
For those that are unfamiliar with the stock, Fortis is one of the largest utilities on the continent. The company boasts operations across ten regions that include parts of Canada, the U.S., and the Caribbean.
Even better, investors should note that Fortis’ operations are backed by long-term regulated contracts that span decades. This fact alone makes Fortis one of the most defensive picks on the market, and that’s not even accounting for growth.
Fortis has earmarked a whopping $22 billion capital plan to fund improvements and upgrades to its facilities. Some of those upgrades include transitioning some facilities over to renewables.
Turning to income, Fortis has provided an annual uptick to its well-covered, quarterly dividend for an incredible 49 consecutive years. The company also plans to continue that tradition, targeting increases of up to 6% over the next several years.
As of the time of writing, Fortis offers a respectable 3.82% yield. This means that investors with $5,000 to spend on Fortis (as part of a larger, well-diversified portfolio) can expect an income of just over $190.
Final thoughts
Market volatility reminds us that the need to diversify has never been greater. Fortunately, both BMO and Fortis offer growth, income, and defensive appeal that should appeal to any investor.
In my opinion, one of both stocks would do well as part of any larger, well-diversified portfolio.
In other words, buy them to hold until retirement.
