Want a Chance at Getting Rich? Invest in Dividend Aristocrats

Are you looking for long-term, compounding growth? That’s what it’ll take to get rich. Yet it doesn’t mean investing in risky stocks.

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published September 20, 2024 9:15 pm EDT

Do you want to get rich? The key is compound interest. Compound interest is a powerful tool for building wealth through investing, and even small contributions can grow significantly over time. For example, if you invest $1,000 at an annual return of 7%, that amount will double in about 10 years without you adding anything further! The more time your money has to grow, the more it will compound, allowing Canadians to maximize long-term wealth with relatively small investments over time. Do you want even more? That’ll require some smart investments in safe companies like Dividend Aristocrats.

dividends grow over time — Source: Getty Images

How it works

When investing, compound interest works by reinvesting your returns, allowing your original investment to grow alongside the returns themselves. For example, if you earn $50 on an initial $1,000 investment, reinvesting that $50 means your next round of returns will be calculated on $1,050, not just the original $1,000. This continuous reinvestment snowballs over time, growing your portfolio exponentially the longer you leave it untouched.

The key to maximizing compound interest is patience. The longer you leave your investments in the market, the greater the growth potential. For Canadians, the best way to achieve this is through consistent investing and reinvesting dividends. Dividend Aristocrats, or companies that have increased their dividends for five years or more, are excellent choices because they provide reliable income that can be reinvested. Reinvesting dividends from these companies further accelerates the power of compound interest, making them ideal for long-term growth.

Dividend Aristocrats are especially powerful for building wealth through compound interest because dividends are reliable and steadily growing. When you reinvest these dividends, not only does your initial investment grow, but each reinvested dividend also earns its own returns. This snowball effect can lead to substantial gains over time, making dividend aristocrats one of the best strategies for Canadians seeking consistent and reliable long-term growth.

Consider Manulife

Manulife Financial (TSX:MFC) on the TSX is a great and safe investment choice for Canadians, especially for those seeking both growth and dividend income. MFC has seen a strong 52-week performance, with its stock up 45.04% year over year as of writing, and it currently offers a forward dividend yield of 4.31%. With a solid price-to-earnings ratio (P/E) of 9.28 and quarterly revenue growth of 12.8% year over year, the company is financially sound and well-positioned for continued success.

MFC’s consistent performance and earnings momentum make it a strong choice for conservative investors looking for reliable dividends. One analyst noted, “Manulife’s steady dividend payout, coupled with its strong balance sheet, makes it an attractive option for those seeking long-term income and growth potential.” With $27.7 billion in cash and a well-managed debt load, Manulife offers both financial stability and consistent dividend payouts, making it an excellent choice for long-term Canadian investors.

Bottom line

Compound interest is the secret sauce for growing wealth, especially when reinvesting dividends from reliable companies like Dividend Aristocrats. Manulife stands out as a great option on the TSX, offering solid earnings momentum and a strong dividend yield of 4.31%. With a 45% stock increase over the past year and a solid financial foundation, MFC is an excellent choice for Canadians looking for both growth and long-term, stable returns!