If you have some extra cash that you don’t need for a long time, you can invest it wisely. After all, the earlier you plan for your retirement, the less you might need to save over time because of compound interest. Here are a couple of smart stocks you can consider buying this year that have a good chance of helping you retire rich.
goeasy
goeasy (TSX:GSY) stock has had some of the strongest dividend growth in the long run. For example, in the last 15 years, it has increased its dividend at a compound annual growth rate (CAGR) of 18.6%.
It is a leading non-prime Canadian consumer lender across various products and acquisition channels, including unsecured lending, home equity loans, point-of-sale lending, and automotive financing. Like its peers, it was hit by a capital-tightening cycle, as interest rates have gone up.
Additionally, the industry is experiencing greater regulation. Thankfully, goeasy is a large player and has the advantage of a larger scale. Therefore, it’s been able to charge a lower average interest rate than smaller players, making it more competitive.
At about $93 per share at writing, the dividend stock already trades at a cheap valuation of about 7.5 times adjusted earnings. It also offers an attractive dividend yield of 4.1%. Its payout ratio is estimated to be about 28% of earnings this year, which would be well within its historical range. Analysts currently believe the undervalued stock trades at a whopping discount of over 40%. However, economists anticipate a recession to occur this year, which could lead to a further selloff in the stock.
Given the need for its lending services for good portion of the Canadian population and the company’s track record of execution, the stock could potentially deliver extraordinary growth over the next decade and beyond.
Alimentation Couche-Tard
More conservative investors can explore Alimentation Couche-Tard (TSX:ATD), which made the list for the best Canadian stocks to buy in 2023! Although the stock is categorized to be in the consumer cyclical sector, its earnings and cash flows have been highly resilient and growing over time — even when recessions rolled around. Sure enough, the stock has a solid dividend track record as proof. Its 15-year dividend-growth rate is a CAGR of 23.1%!
The global convenience store consolidator has a scale advantage compared to smaller players. Additionally, its decentralized management model helps drive accountability and entrepreneurship. Acquisitions and integrations are one of Couche-Tard’s growth pillars.
Historically, management has been superb at capital allocation, taking care to generate substantial cash flow, growing dividends, reinvesting into the business, and making strategic acquisitions. Management continues to see significant opportunities for acquisitions, particularly in the United States and Asia.
Surely, for Couche-Tard’s business, which is more defensive and predictable through economic cycles, the stock trades at a smaller discount compared to goeasy. Analysts believe the stock trades at a discount of about 10% at $67.54 per share at writing. Notably, it only offers a dividend yield of 0.8%. So, naturally, investors should focus on its growth potential.
Don’t just settle on two stocks that could help you retire rich. Explore more dividend stocks for greater portfolio diversification.
