In today’s world, our finances are often stretched thin by numerous demands – whether it’s dining out, enjoying the latest gadgets, or indulging in high-end fashion and luxury vacations. Amidst these immediate pleasures, long-term saving and investing can easily slip down the priority list. However, striking a balance between immediate gratification and future financial security is crucial for achieving both short-term joy and long-term wealth.
A smart strategy might involve automatically allocating a percentage of your paycheque – say, 10% – to a long-term investment account. To guide you in this endeavour, here are three solid stock ideas that could pave the way to a prosperous retirement.
Constellation Software: A proven growth machine
Constellation Software (TSX:CSU) is a stellar example of a high-growth stock that has rewarded its investors handsomely. With a business model centred around acquiring and integrating vertical market software companies, Constellation Software has achieved remarkable wealth creation.
Over the last decade, the company has delivered returns that are nothing short of extraordinary, multiplying investors’ initial stakes nearly 17-fold. For instance, a $10,000 investment would have surged to approximately $169,500 – driven by the company’s earnings-per-share growth of over eight times and valuation expansion, as more and more investors realized how exceptional the business is.
The top tech stock’s price currently stands at about $4,286 per share, translating to roughly 44 times adjusted earnings. It’s noteworthy that the stock does not come cheap. Potential investors might consider dollar-cost averaging to gradually build their position or wait for significant market corrections to enter at more favourable prices. The company’s consistent performance and strategic acquisitions make it a strong candidate for long-term investment.
Canadian National Railway: A network of stability and growth
Canadian National Railway (TSX:CNR) represents another robust option for those looking to build wealth over time. With a rail network extending from the Atlantic coast in Nova Scotia to the Pacific coast in British Columbia and into the United States, CN Rail boasts a strategic advantage that enables it to serve a broad spectrum of industries and geographic regions. This extensive network contributes to a stable and diverse revenue stream.
In the past decade, Canadian National Railway has demonstrated impressive financial growth. The company’s revenue per share has grown at a compound annual growth rate (CAGR) of 7.4%. Additionally, diluted earnings per share and dividends per share have risen at CAGRs of approximately 10.7% and 13.9%, respectively.
With the stock priced at $161.44 per share at writing, it offers a dividend yield of about 2.1%. Analysts suggest that the stock is fairly valued, making it a reliable choice for those seeking both stability and growth in their investment portfolio.
Brookfield Infrastructure Partners: A diversified income generator
Brookfield Infrastructure Partners L.P. (TSX:BIP.UN) provides another excellent opportunity for those aiming for a wealthy retirement. The company operates a diversified portfolio of infrastructure assets, including rail networks, toll roads, utilities, midstream energy, and data infrastructure. Approximately 90% of its cash flows are secured by long-term contracts or regulated, offering a high degree of stability.
Over the past decade, Brookfield Infrastructure has delivered solid performance, increasing its cash distribution per unit at a CAGR of 8.3% with an average funds from operations payout ratio of 70%.
In the last 10 years, the stock has turned an initial $10,000 investment into about $40,570, reflecting extraordinary total returns of approximately 15% per year.
Currently, units trade at $45.15, and analysts believe the stock is undervalued by about 14%. At this price, Brookfield Infrastructure offers a cash distribution yield of about 4.9%, making it a compelling choice for investors seeking reliable income and growth.
The Foolish investor takeaway
In conclusion, while the allure of immediate spending can be strong, prioritizing long-term investments in high-growth and stable dividend stocks can significantly enhance your retirement prospects.
Constellation Software, Canadian National Railway, and Brookfield Infrastructure Partners are wonderful businesses that can contribute to a prosperous financial future.
