Creating wealth of $1 million is not difficult, provided you are disciplined and patient. An investment of $45,000, growing at 13% for 25 years, would create above $1 million of wealth. Also, you can save on taxes by investing through your TFSA (tax-free savings account). Meanwhile, the following three TSX stocks can potentially deliver over 13% of annual returns in the long run.
Dollarama
Dollarama (TSX:DOL) is a defensive stock with a growth tilt. The discount retailer has an extensive presence across Canada and offers a wide range of consumer products at attractive prices. It has delivered double-digit top and bottom-line growth for the previous 12 years. Supported by these solid performances, the discount retailer has returned over 850% in the last 10 years at an annualized growth rate of 25.4%.
Meanwhile, I expect the uptrend to continue. With inflation creating deeper holes in consumer pockets, Dollarama could witness higher footfalls due to its compelling value offerings. Besides, the company expects to add around 475 stores over the next seven years to increase its store count to 2,000 by 2031. The company is also strengthening its direct sourcing abilities and improving logistics efficiency to deliver the products at a compelling value. Further, the increased contribution from its subsidiary, Dollarcity, amid its store expansions, could also boost its bottom line. Considering all these factors, I believe Dollarama could deliver over 13% of annualized returns in the long run.
goeasy
goeasy (TSX:GSY), which provides leasing and lending services to subprime customers, is my second pick. After growing its revenue and adjusted EPS at an annualized rate of 13.9% and 24.8% over the previous 21 years, respectively, the company has continued its uptrend even this year. In the first two quarters, its revenue and adjusted EPS have grown by 22% and 15%, respectively. Supported by these solid financials, the value lender has delivered impressive returns of over 2,700% in the last 20 years at an 18.2% CAGR (compound annual growth rate).
Despite the strong growth, the subprime lender has acquired just a small percentage of the $200 billion subprime credit market. Also, the company is improving its product pricing and cost structure to lower the impact of the government’s initiative to reduce the maximum allowable interest rate. So, its growth prospects look healthy. Besides, the company pays a quarterly dividend of $0.96/share, with its forward yield at 3.48%. Also, GSY trades at an attractive NTM (next 12 months) price-to-earnings multiple of 7.4, making it an attractive buy.
BCE
The telecommunication sector is a capital-intensive business. So, the rising interest rates have weighed on the industry. Amid the weakness, BCE (TSX:BCE) has lost around 9% of its stock value this year and trades at an attractive NTM (next 12 months) price-to-earnings multiple of 16.
However, the growing demand for telecommunication services amid digitization offers excellent long-term growth prospects. Besides, the company is expanding its 5G and broadband infrastructure to meet the rising demand. Also, its multi-product bundling and growing penetration could expand its customer base and ARPU (average revenue per user), thus boosting its financials.
Further, the telco has rewarded its shareholders by raising its dividends by over 5% yearly for the previous 15 years. Its forward yield currently stands at a juicy 7.54%. Considering all these factors, I believe BCE would be an excellent long-term buy.
