Becoming a millionaire by investing in the stock market is something essentially anyone can do. That doesn’t mean it’s easy, and that doesn’t mean it can happen quickly. But when you consistently save and invest your cash and build a well-diversified portfolio of high-quality stocks like BCE (TSX:BCE) that you can own for the long haul, it becomes a lot less difficult to achieve.
The key to becoming a millionaire in the market is investing for the long haul, keeping your emotions in check, utilizing registered accounts like the Tax-Free Savings Account (TFSA) and identifying the highest quality companies that you can buy and hold for years.
Diversification is key because it most importantly helps to mitigate risk by spreading your exposure to different industries. It also offers you more potential for gains as well, though, particularly when buying growth stocks.
What a diversified portfolio looks like for you will almost certainly be different than mine and probably even most people you know. It’s all about buying stocks that you understand and are comfortable holding and also align with your risk tolerance.
A younger investor with a higher risk tolerance may not want or need as many low-risk dividend stocks and may prefer to own more growth stocks in their portfolio. Conversely, an investor close to retirement won’t need many growth stocks in their portfolio, but they will need a lot of safe and reliable dividend stocks to help provide them with passive income.
So, in the case of BCE stock, for most investors, it’s certainly a stock that can help you become a millionaire as part of a diversified portfolio. It may not offer the significant growth potential of a small-cap tech stock, but its well-established and defensive business operations make it one of the best blue-chip dividend stocks you can buy.
Why is BCE an ideal dividend stock?
There are several reasons why BCE is such a high-quality dividend stock and a core portfolio stock that you can buy and hold for years.
First off, it’s a massive and dominant business in the telecommunications industry, which has massive barriers to entry and few significant competitors.
Furthermore, although telecom stocks have been investing heavily in expanding their fibre-to-the-home and 5G footprints in recent years, once these robust networks are operational, the ongoing maintenance costs tend to be relatively manageable.
This is largely because the majority of the assets in the telecom industry, like fibre optic cables and cell towers, are long-life assets. So, telecom stocks often find that their year-on-year capital expenditures for maintenance are not as substantial. This is one of the reasons a stock like BCE is such a cash cow and is consistently generating billions in cash flow.
In addition to its attractive economics, though, another major reason BCE is such an ideal stock to buy and hold for the long haul is that it’s a low-volatility stock with relatively defensive operations. Communications are increasingly becoming essential services, especially as technology continues to develop every day.
Dividend growth is key to long-term investing
As the telecommunications industry continues to grow, BCE is consistently seeing its profit and cash flow generation increase as well, which leads to dividend increases for the stock.
This is significant because, in addition to ensuring the passive income you’re generating is outpacing inflation, consistent dividend growth also leads to growth in the share price.
Furthermore, the more cash you receive from dividends, the quicker you can reinvest it in new opportunities and take advantage of the power of compounding.
Today, BCE stock pays an annual dividend of $3.87 per share, which, at roughly $55 a share for BCE, equates to a yield of roughly 7%.
And while that yield is certainly attractive, it’s also impressive that over the last five years, BCE’s dividend has increased by more than 22%, showing why it’s one of the best blue-chip dividend stocks in Canada.
So, if you’re looking to become a millionaire by investing in the stock market, it’s essential to invest for the long haul and build a high-quality and diversified portfolio of top-notch stocks like BCE.
