Canadians can use several strategies when investing in the stock market. Investing in growth stocks can generate significant short-term returns, but it comes with a significant risk to investment capital. To achieve truly substantial wealth growth, investing with a long-term game in mind and balancing with growth stocks might be a better approach.
While they might not offer rapid capital gains, high-quality, blue-chip stocks can add a lot of stability and steady returns over the long term to an investor’s portfolio. Besides offering capital gains, these stocks also distribute dividends every quarter from profits to reward investors. Here are three such dividend stocks to consider for your self-directed portfolio.
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Royal Bank of Canada
Royal Bank of Canada (TSX: RY) is a $209.73 billion market capitalization multinational financial services company and Canada’s largest bank. Headquartered in Toronto, it is also the largest TSX stock by market cap. Being the leading bank in the country, it is a stock well-known for its durability and commitment to rewarding shareholders.
Royal Bank of Canada stock is one of the oldest dividend-paying stocks, having paid its investors dividends without fail for the last 154 years. The bank has a diversified client base, and it has sustained earnings growth throughout the decades to drive its stock and dividend payouts reliably.
As of this writing, RY stock trades for $148.21 per share, up by almost 100% in the last decade. It pays its shareholders their dividends at a 3.83% dividend yield.
Canadian National Railway
Canadian National Railway (TSX: CNR) is another industry-leading stock. The $102.28 billion market capitalization stock headquartered in Montreal boasts one of the most extensive railway networks in North America.
Its railway spans Canada from one coast to the other, connecting Canada, the U.S., and Mexico. With over 19,000 miles of track in its network, it is responsible for transporting millions of carloads of cargo throughout the region, making it a reliable investment.
Being an essential service provider, CNR stock is a resilient business that remains stable throughout market cycles. Since it became a publicly listed company, it has grown shareholder value considerably. As of this writing, CNR stock trades for $160.77 per share, paying its shareholders their dividends at a 2.10% dividend yield. Over the last ten years, it has delivered growth through capital gains of 128%.
Loblaw
Loblaw Companies (TSX: L) is the largest retailer of food and pharmaceutical products in Canada. The Brampton-headquartered $49.99 billion market cap company is another excellent holding for investors seeking stock of industry-leading companies in their self-directed portfolios. It runs a recession-resistant business, generating steady earnings and free cash flows regardless of market circumstances.
Typically, low-risk businesses do not offer rapid capital gains. However, Loblaw stock has defied the general market trend. As of this writing, Loblaw stock trades for $163.35 per share. In the last 10 years, it is up by over 300%. To make things better, it has a solid share repurchase program and reliable dividends to increase shareholder value further. At current levels, it pays its investors a 1.26% dividend yield.
Foolish takeaway
Adding holdings to your self-directed portfolio with a long investment horizon can be an excellent way to achieve financial freedom by the time you retire. To make the most of long-term investments for significant wealth growth, consider allocating a portion of your available Tax-Free Savings Account (TFSA) to blue-chip stocks and use a dividend-reinvestment program to unlock the power of compounding.
By using dividends from these stocks to purchase more shares, you can accelerate the wealth growth in your TFSA without exceeding the contribution limit. Additionally, you can enjoy the returns from your investments without incurring any income or capital gains tax. To this end, these three Canadian stocks can be excellent holdings to consider.
