Achieving financial freedom is a herculean task, but the reward is having enough resources to live on without fear of financial dislocation in the future. The journey begins with a well-laid plan, including total control of your finances. A must is a sustained habit of saving, investing, and avoiding debt as much as possible.
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Effective strategy
Dividend investing is one of the effective strategies for providing regular folks a crack at the elusive dream. Companies paying dividends can help build an income portfolio. However, instead of collecting dividend income, you reinvest it quarterly or monthly. Your money will accumulate or compound over time.
Three dividend stocks can help you achieve financial freedom if you’re starting on ground zero.
Dividend pioneer
The Bank of Montreal (TSX: BMO), Canada’s third-largest bank today and TSX’s dividend pioneer, is a keeper. This $101.5 billion lender started paying dividends in 1829. At $139.11 per share (+11.4% year-to-date), the dividend yield is 4.6%. The 195-year payment history is the compelling reason to make BMO your anchor stock.
On December 5, 2024, the Board approved a 4% dividend hike. For illustration purposes, a $20,170.95 investment (accumulated 145 shares) will more than double to $50,549.20 in 20 years. Assuming the yield remains constant, you’ll receive $583.84 in quarterly passive income starting January 2045.
Market analysts are optimistic about BMO’s expansion potential and long-term growth in the U.S. now that it has fully integrated Bank of the West with its operations. In fiscal 2024 (12 months ending October 31, 2024), net income rose 65% year-over-year to $7.3 billion.
Darryl White, CEO of BMO Financial Group, said, “We’re entering 2025 with a strong foundation and significant balance sheet capacity for growth.”
Dividend aristocrat
Canadian National Resources Limited (TSX: CNQ) is an energy sector giant and a dividend aristocrat. The $91.9 billion senior crude oil and natural gas producer has raised dividends for 12 consecutive years. At $43.47 per share, you can partake in the 5% dividend yield.
Industry experts see favourable, strong long-term prospects, notwithstanding oil price volatility. The top-tier energy stock appears undervalued, given the price forecasts. Market analysts’ 12-month average price target is $56.17, a 29% potential upside.
Its President, Scott Stauth, said Canadian Natural Resources’ unique and diverse asset base is a competitive advantage. It enables the company to allocate and deploy capital to the highest-return projects without relying on one commodity.
Resilient portfolio
Granite (TSX: GRT.UN) in the real estate sector deserves a spot in any income portfolio because of its resiliency amid a challenging environment. Besides the hefty 4.8% dividend yield, the REIT boasts a 21-year dividend growth streak. As of December 24, 2024, the share price is $71.29.
This $4.5 billion real estate investment trust (REIT) owns and operates properties in Canada, the U.S., and Europe. The portfolio consists of industrial and warehouse properties for e-commerce and special purposes, as well as flexi/office properties. Management’s long-standing transformation and growth strategy are simple: focus on markets with superior economic conditions and fundamentals.
Set the path
There’s no shortcut to financial freedom but you can set the path and achieve it over time with financial discipline and the right investment choices.
