As an investor, it’s important to learn the difference between getting rich and getting richer than you are now. The latter is far more achievable with the right mindset and approach, especially if you have realistic goals and can do it by playing it safe with your investments.
However, if you want to get rich, developing a healthy risk tolerance is important. This would allow you to leverage a broader range of opportunities. Here are two such opportunities (in the form of income stocks).
Real estate investment trusts (REITs) are income-producing by design. The trusts are structured in a way that they are legally obligated to dispense the bulk of their income to the shareholders in the form of dividends.
This makes them a good pick for passive income but rarely for growth. The ones that do offer growth may not have proportionally healthy dividend yields. However, Allied Properties REIT (TSX:AP.UN) may offer the best of both worlds.
Up until 2020, the stock experienced consistent and decent growth. It was one of the best-growing REIT stocks in Canada, but it has struggled since the pandemic. It has lost over 70% of its valuation since Jan. 2020, which has resulted in its modest yield climbing to double digits. It’s currently offering dividends at a mouthwatering 10.8% yield.
Despite an unnaturally high payout ratio of around 400%, the REIT has maintained its payouts. It also has a long history of growing its payouts and has managed to retain its position among the aristocrats, and it may continue to do so. But there is the risk of the REIT slashing its payouts.
If you can tolerate this risk and lock in this high yield, you can generate a solid dividend income. Additionally, if the stock starts growing at its pre-pandemic pace, you will have a solid growth stock on your hands that’s also generating income for you at a lavish rate.
goeasy (TSX:GSY) has been an income-producing company for well over a decade and has joined the ranks of the aristocrats by growing its payouts for the last eight consecutive years.
The dividend growth was exceptional initially, and even though the pacing has become more realistic in the previous few years, it’s still above the typical par for aristocrats. It offers dividends at a modest yield of 3% at a stable payout ratio of 32%.
Even though the dividend growth is impressive, that’s not why it may be counted as a once-in-a-decade opportunity. goeasy was a remarkable growth stock in the past (though a bit inconsistent) and experienced explosive growth after the 2020 crash, followed by an equally brutal slump of over 55%.
However, it has been going upward since then, albeit at a modest pace, and its valuation also gives an indication of decent future growth.
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The two stocks offer two different ways to become rich: one through a high yield (generous income-production potential) and the other through its powerful growth potential.
Also, even though the two aren’t even large-cap stocks right now, let alone blue chips, they are among the leaders in their niche space/industries. This status mitigates the risk, at least to some extent.