Early retirement is a challenging prospect for many Canadians, even when the economy is healthy. In the current economy, it seems even more impossible. Not only would it require you to set aside a significant sum every year, but the stocks where you park this sum would also have to be carefully chosen for maximum growth potential.
There are three growth stocks that, based on their performance in the last decade, may give you a fighting chance. To make the retirement planning projections a bit more practical, we will assume that the stocks will perform at least half as well as they did in the last decades.
An industrial stock
Toromont Industries (TSX:TIH) is a Canadian leader in the heavy equipment business. It’s one of the largest dealers of Caterpillar equipment in the world and has specialized service and rental units that cater to the equipment needs of multiple industries, predominantly energy.
A company like Toromont thrives in a good economy when more projects come online and businesses need more of the equipment that Toromont supplies.
While it’s a well-established dividend aristocrat, the bulk of its returns in the last decade came from its growth. The overall returns were 460%, so even if it performs half as well in the future, you can expect about 5.7 times returns in the next 25 years. With $100,000 invested in the company, it can generate over half a million dollars for you at this growth rate.
A real estate stock
Colliers International Group (TSX:CIGI) offers a wide range of commercial real estate services in multiple countries. A geographically diverse operation, broad service portfolio, and healthy financials are just some of the strengths of this stock. Its performance over the years has been just as impressive. The growth hasn’t been consistent, but the overall returns are quite significant – almost 590% in the last decade.
If it performs half as well, that would be 2.9 times growth in the next decade and over 7.3 times growth in the next 25 years. This will grow $100,000 capital to quite close to three-quarters of a million dollars over the designated period. The stock currently carries a hefty amount of debt, though it’s understandable considering the scope and reach of its services. But its undervaluation is a factor worth considering.
An energy stock
TerraVest Industries (TSX:TVK) is not a typical energy stock, and it’s a good thing, especially from a growth perspective. Unlike most energy stocks that slumped hard after 2014 and rapidly grew in the post-pandemic market, increasing the probability of a brutal correction, TerraVest has almost consistently grown over the past decade, and the growth has been substantial.
The stock returned over 1,300% in the last decade, and over 800% of this came from the price appreciation. Even if this stock does half as well in the coming decades, the performance would be better than the full last-decade performance of the two stocks above – 6.5 times in a single decade and over 16 times in the next 25 years.
You can expect a $100,000 nest egg to grow to one and a half million if the stock keeps performing at the projected pace for the next two and a half decades.
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Foolish takeaway
Based on these projections, a $300,000 investment in the three stocks can help you build a nest egg of over $2.5 million in 25 years. This is enough to generate $100,000 every year in dividends alone with just a 4% collective yield, which can be achieved through some of the safest dividend aristocrats.
That’s more than enough to retire early. So, if you are in your 40s, you can retire at or before 60. If you are in your 30s, you can retire in your 50s, assuming everything goes as planned.
