The majority of individuals invest in the global stock market and other asset classes with the eventual goal of saving for retirement. Most financial experts advise you to allocate a major portion of your equity investments towards well-diversified index funds such as the S&P 500. However, you should also look to build a portfolio of quality growth stocks that can help deliver outsized gains and accelerate your retirement plans.
Here are three such stocks that can help you build long-term wealth and retire rich.
One of the world’s largest companies, Microsoft (NASDAQ:MSFT) continues to grow at an enviable pace increasing its revenue from US$125.8 billion in fiscal 2019 to almost US$200 billion in fiscal 2022 (ended in June). Microsoft is a leader in several segments, including enterprise software, gaming, artificial intelligence, and cloud computing.
Equipped with a strong balance sheet, Microsoft also pays investors a dividend yield of 1%. That yield might not seem attractive. But the tech giant has increased these payouts by almost 200% in the past decade.
Microsoft has enough room to keep increasing dividends as it generated US$7.2 billion in free cash flow in fiscal Q2. Comparatively, it paid investors around US$5 billion in dividends in the quarter.
Microsoft ended the December quarter with US$99.5 billion in cash and US$44 billion of long-term debt, providing it with enough room to reinvest in growth or consider accretive acquisitions.
MSFT stock has already returned 1,690% to shareholders in the last two decades, compared to the S&P 500 gains of 565%.
Neighbourly Pharmacy stock
A small-cap stock with massive potential, Neighbourly Pharmacy (TSX:NBLY) went public in May 2021. Currently trading 46% below all-time highs, NBLY stock is valued at a market cap of $950 million.
The Canadian company primarily owns and operates a chain of retail pharmacies in the country’s underserved regions. It ended the December quarter with 275 pharmacies and has identified 3,500 other outlets that meet acquisition criteria.
An acquisition-based business model allows Neighbourly Pharmacy to increase sales by 91% year over year in fiscal Q3 of 2023 (ended in December). Its adjusted EBITDA also rose by 97% to $28.5 million, indicating a margin of 10.8%, which is 40 basis points higher than the year-ago period.
Priced at 28 times forward earnings, NBLY stock is trading at a discount of 38% to consensus price target estimates.
Brookfield Asset Management stock
The final growth stock on my list is Brookfield Asset Management (TSX:BAM). One of the largest asset managers globally, BAM manages more than US$800 billion worth of assets. It owns assets across multiple sectors, including clean energy, infrastructure, real estate, and private equity, offering investors enough diversification.
These diversified cash flows allow Brookfield Asset Management to pay shareholders annual dividends of $1.28 per share, indicating a forward yield of almost 4%. Moreover, the company claimed it will increase dividends between 15% and 20% annually over the long term.
BAM’s dividends depend on fee-related earnings, which in turn are tied to its assets under management. In 2022, Brookfield Asset Management raised more than US$90 billion from investors providing Bay Street with visibility into the future growth of its management fees.