We invest today to retire tomorrow — that is, sometime in the future. The longer you have until retirement, the more you can save and the bigger your nest egg can grow. Regular savings and investing for a reasonable long-term rate of return can lead to a substantial retirement fund. So, the earlier you start, the better!
For example, since 2003, with dividends reinvested, the Canadian stock market (using iShares S&P/TSX 60 Index ETF as a proxy) delivered total returns of 8.7%, essentially turning an initial investment of $10,000 into $55,274.
Saving and investing $10,000 every year for 20 years with an 8.7% return per year would have transformed into a nest egg of $494,694.91! This illustrates the power of regular savings and compound interest. On an 8.7% rate of return, the Rule of 72 approximates that it’d take about 8.3 years to double your money on an investment.
Here are a couple of top dividend stocks that you can invest in today to retire tomorrow. You can buy shares in your Tax-Free Savings Account (TFSA) to help build a nice nest egg for retirement.
goeasy
goeasy (TSX: GSY) stock is about 22% below its 52-week high. However, in the long run, it has delivered extraordinary returns. For instance, since 2003, with dividends reinvested, the growth stock delivered total returns of 17.6% per year, turning an initial investment of $10,000 into $277,829.
The leading non-prime Canadian consumer lender has taken a beating since peaking in September 2021. After the market correction, the dividend stock has been in consolidation for roughly a year, and it now offers excellent value for long-term investment.
At $111.75 per share at writing, it trades at about 10.3 times earnings versus its long-term normal price-to-earnings ratio of close to 12.9. This suggests an undervalued stock trading at a discount of approximately 20%. Analysts are even more bullish with a 12-month price target of $162.10, suggesting near-term upside potential of 45% or a substantial discount of 31%.
No matter how we look at it, the growth stock is on sale, and it offers a dividend yield of 3.4% as icing on the cake! Over the next five years, it has the potential to deliver total returns of more or less 15% per year without dividend reinvestment. If materialized, it means investors could potentially roughly double their investment in about five years.
Brookfield Renewable Partners
The TFSA is also the perfect place to park Brookfield Renewable Partners (TSX: BEP.UN) units. The renewable power utility offers a long, multi-decade growth runway under the energy transition and decarbonization theme.
Despite recent market and interest rate volatility, the business has been resilient. It has a diversified renewable power portfolio that is approximately 90% contracted and has a weighted average remaining contract duration of roughly 14 years. Also, close to 70% of its revenues are indexed to inflation, and 97% of its debt is fixed rate. Further, it operates essential, low-cost infrastructure with gross margins of over 70%. So, the business has durable profits, foreseeable cash flows, and predictable interest expenses.
Through its global scale, operational and development expertise, and value investing approach, BEP targets funds-from-operations-per-unit growth of north of 10% per year through 2027. Consequently, it targets long-term returns of 12-15%, including cash distribution growth of 5-9% per year.
At $39.60 per unit at writing, analysts believe the dividend stock is discounted by about 19%, suggesting near-term upside prospects of almost 24%. It also provides a decent cash distribution yield of 4.5%.
