A family can have greater financial security for years by passing down financial wealth and assets to immediate family members. Financial wealth refers to money, savings, and investments, while assets refer to houses, real estate properties, and jewelry.
However, those without hard assets to give or leave with heirs can build generational wealth through dividend investing. The stock market is not risk-free, although a long investment timeframe helps reduce risk and counter recurring volatility.
Canadians could create lasting generational wealth by investing in the Bank of Montreal (TSX: BMO) and Canadian Utilities (TSX: CU). The former is TSX’s dividend pioneer, while the latter is its first dividend king. The power of compound interest comes into play if you reinvest dividends (four times a year) from both stocks. Your capital grows faster and eventually becomes a fortune over time.
Source: Getty Images
Dividend pioneer
BMO is Canada’s oldest bank and dividend pioneer. The dividend track record is 195 years and counting. The prevailing dividend yield of 5% is not the highest in the market, but it is sure to be safe and sustainable given the Big Bank’s solid payment history. You get peace of mind for the price of $126.33 per share.
The $91.3 billion financial institution has a stronger position and presence in the U.S. following the acquisition of the Bank of the West in February 2023. BMO finished the migration and integration of customers in March of this year. The Group’s CEO, Darryl White, said the acquisition added meaningful scale, expansion in attractive markets, and capabilities to drive greater growth, returns, and efficiencies.
Meanwhile, the appointment of Kristin Milchanowski as its new Chief Artificial Intelligence and Data Officer in mid-October signals the bank’s AI, data analytics, and robotics strategies to enhance business value. The Evident AI Innovation in Banking Index ranks BMO ninth in the world in AI innovation.
BMO is doing well after three quarters in fiscal 2024. In the nine months ending July 31, 2024, revenue and net income increased 12.2% and 45.7% year-over-year respectively to $23.8 billion and $5 billion. According to White, BMO is well-positioned to deliver sustainable returns to shareholders. Besides a strong balance sheet and robust capital and liquidity, strategic goals are firmly in place.
Dividend king
Utility companies are stable and safe choices for income-focused investors. The TSX has plenty, but Canadian Utilities stands out from the rest. This utility stock is Canada’s first dividend king, and the magic number is “52,” the longest record of annual dividend increases by a publicly traded company in the country.
At $35.68 per share, current investors enjoy a 16.8% year-to-date gain on top of the 5.2% dividend yield. The $9.6 billion company boasts a highly contracted and regulated earnings base, the foundation for sustained dividend growth. Management said the company will invest $4.6 to $5.6 million from 2024 to 2026 in regulated utilities to further grow cash flows and earnings.
Incredible feats
BMO and Canadian Utilities are compelling investments for their incredible dividend track record and dividend growth streak, respectively. The dividend pioneer or dividend king can help you build lasting generational wealth.
