If you have an extra $2,000 lying around that you don’t need for a long time, you should consider investing it. How much money can you make from $2,000? Let’s take a look at the North American stock markets for examples.
XIU and SPY data by YCharts
According to YCharts data, in the last 10 years, the Canadian stock market delivered 4.6% per year by price appreciation alone, including cash distributions, the total return was 7.7% per year. In the same period, the U.S. stock market delivered returns of 11% per year from price gains, and including cash distributions, annualized returns of 13% per year. These are benchmarks as a reference.
On a $2,000 investment, a 7.7% return on the first year equates to earning $154. On a 13% return, it’s $260. Compound interest is an extremely powerful way to help you build lasting wealth when you consistently save every month and reinvest your profits for years to come.
Here are a couple of stocks that appear to be good buys today and could outperform the North American stock markets over the next few years.
FirstService
FirstService (TSX:FSV) experienced price gains of 20.6% and total returns of 21.4% per year over the last decade. Although its dividend yield of 0.6% is small, it has been a diligent dividend grower over about 11 consecutive years. For your reference, its five-year dividend growth rate is 10.8%, and its last dividend hike was 11.1% in May.
FirstService offers real estate services in North America, including managing residential communities. Furthermore, it provides essential property services through individually branded franchise systems and company-owned operations.
At under $222 per share at writing, analysts believe it trades at a discount of about 12%. This represents 12-month upside potential of approximately 13%. So, it’s a reasonable buy here for long-term investors who seek total returns.
Northland Power
Northland Power (TSX:NPI) stock has sold off substantially by about 35% from the start of 2022 because of higher interest rates, as it has sizeable debt on its balance sheet.
Its long-term debt-to-capital ratio is about 56%, but it does score an investment-grade S&P credit rating of BBB. Its trailing-12-month interest expense was $24 million (or 7%) higher than the 2020 year level, which doesn’t seem too bad.
Importantly, the stock trades at a good valuation, especially if you account for its projects that are expected to come into service in 2025 to 2027.
At $24.65 per share at writing, the analyst consensus 12-month price target suggests a discount of about 17% in the stock. It also offers a dividend yield of almost 4.9%, which is paid out in monthly dividends.
Management anticipates the Oneida 250-MW Canadian battery storage business to start contributing to cash flows in 2025, the 1-GW Hai Long offshore wind project in Taiwan (of which Northland has 30.6% ownership) to be in full commercial operation in 2026 to 2027, and the 1.1 GW Baltic Power offshore wind project (of which Northland owns 49%) in Poland to come online in 2026. As these projects are successfully completed on time and on budget, it should trigger a stock turnaround.
It’s even possible for the stock to trade again at the $40 level by 2027. If this materializes, it would imply total returns of north of 20% per year over the next few years.
