Everyone desires to be wealthy, and those with rich family backgrounds are lucky. They become millionaires through inheritance or the transfer of generational wealth. However, regular folks can make their first million through the stock market.
Stock investing has risks but it is a tried-and-true way to attain wealth. The key is to take a longer investment horizon or start investing while you are young. You will benefit immensely from compound growth when you stay in the market. Last, buy stocks of profitable companies.
Toronto Dominion Bank (TSX: TD) is a winning investment for its lengthy dividend track record, while Hammond Power Solutions (TSX: HPS.A) is the TSX’s newest millionaire maker.
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Proven wealth-builder
TD, Canada’s second-largest financial institution, is a solid choice for most wealth-builders. The 167-year dividend payment history is proof of its financial stability and resiliency regardless of the economic environment. This $149.5 billion bank has rewarded investors with a 42,859.7% return in 51.8 years (a 12.4% compound annual growth rate). Besides the dividends, there is capital appreciation.
If you invest in TD today ($85.51 per share), the dividend yield is 4.8%. An $85,510 investment will compound to $220,741 in 20 years, including dividend reinvestment. If the position is 10 times more, the final balance within the same timeframe is $1,103,750.
Assuming the yield remains constant, the quarterly dividend is $5,098.53. You should have enough in retirement if you add the Canada Pension Plan (CPP) and Old Age Security (OAS).
TD has survived the harshest headwinds, including the 2008 financial crisis and global pandemic. The bank has delivered handsome profits yearly since fiscal year 2020. Its Group President and CEO, Bharat Masrani, said TD will continue to invest in new and innovative capabilities and expand product offerings.
The growth engine is the Canadian Personal and Commercial Banking division, TD’s leading deposit franchise. In Q3 fiscal 2024 (three months ended July 31, 2024), the business segment’s net income rose 13% year-over-year to $1.9 billion due to higher revenue and volume growth. Market analysts’ high price target in one year is $93.50 (+9.3%).
High-growth stock
On September 10, 2024, the TSX released the TSX30 List, the sixth edition of the flagship program for the top 30 top-performing Canadian stocks. Hammond Power Solutions ranked number one with a 928% return (based on the dividend-adjusted share price) over the past three years.
The $1.5 billion company, through or with its subsidiaries, designs, manufactures, and sells dry-type transformers used globally in electrical equipment and systems. Hammond caters to customers in vital sectors such as commercial construction, data centres, oil & gas, mining, steel, waste & water treatment, and wind power generation.
In the first half of 2024, earnings from operations rose 9.2% year-over-year to $45.3 million, when the U.S. market delivered the highest growth. According to management, the primary focus is to generate cash from operations, continue investing in growth initiatives, and maintain liquidity and access to capital to sustain future growth.
At $131 per share (+61% year-to-date), this high-growth stock pays a modest 0.8% dividend.
Become a millionaire
TD and Hammond Power Solutions will continue to create millionaires. Take advantage now while time is on your side.
