Buy Now, Play Later: 3 Stocks for a Wealthy Retirement

To help secure a wealthy retirement, Canadians should balance between current enjoyment and saving for long-term investing.

| More on:
Person holding a smartphone with a stock chart on screen

Source: Getty Images

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.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Kay Ng has positions in Brookfield Infrastructure Partners and Canadian National Railway. The Motley Fool recommends Brookfield Infrastructure Partners, Canadian National Railway, and Constellation Software. The Motley Fool has a disclosure policy.

More on Retirement

Glass piggy bank
Retirement

Retirement Savings Boost: Increase Your Income by $988 Annually

Don't just let your savings sit there. Add to them with even just a comparatively small investment in this dividend…

Read more »

senior man and woman stretch their legs on yoga mats outside
Dividend Stocks

Retirees: How to Create a Combo Passive Income Portfolio With a TFSA and RRSP

Passive income in retirement is a key option for those seeking income that lasts. And making use of the TFSA…

Read more »

woman looks at iPhone
Retirement

Retirees: Set it and Forget it With 3 Long-Term Growth Gems

These long-term Canadian gems provide stability and have higher potential to deliver stellar capital gains over time.

Read more »

edit Balloon shaped as a heart
Retirement

3 Stocks Canadian Retirees Should Absolutely Love

These dividend stocks deserve to be on your radar for a portfolio targeting passive income.

Read more »

exchange-traded funds
Retirement

How to Use a TFSA to Earn $250 per Month in Tax-Free Passive Income

This low-cost Canadian dividend ETF can help you kick-start a TFSA for passive monthly income.

Read more »

A man smiles while playing a video game.
Retirement

Retired Canadians: The Smartest Income Stocks to Buy With $5,000

TD Bank (TSX:TD) stock stands out as a dividend stock steal at these prices.

Read more »

Two senior friends playing beat tennis on sand tennis court
Retirement

Retirees: What Is the CPP Enhancement and How to Use it

The CPP benefit might mean taking a cut from your paycheque now, but it means a far larger paycheque down…

Read more »

Piggy bank with word TFSA for tax-free savings accounts.
Stocks for Beginners

4 Canadian Stocks to Buy and Hold Forever in Your TFSA

Looking for growth and income? These four Canadian stocks are the best of the best, especially as a long-term hold.

Read more »