Canada markets closed
  • S&P/TSX

    20,197.61
    +15.69 (+0.08%)
     
  • S&P 500

    3,901.36
    +0.57 (+0.01%)
     
  • DOW

    31,261.90
    +8.77 (+0.03%)
     
  • CAD/USD

    0.7790
    -0.0009 (-0.12%)
     
  • CRUDE OIL

    110.35
    +0.46 (+0.42%)
     
  • BTC-CAD

    37,791.75
    +524.99 (+1.41%)
     
  • CMC Crypto 200

    650.34
    -23.03 (-3.42%)
     
  • GOLD FUTURES

    1,845.10
    +3.90 (+0.21%)
     
  • RUSSELL 2000

    1,773.27
    -2.96 (-0.17%)
     
  • 10-Yr Bond

    2.7870
    -0.0680 (-2.38%)
     
  • NASDAQ

    11,354.62
    -33.88 (-0.30%)
     
  • VOLATILITY

    29.43
    +0.08 (+0.27%)
     
  • FTSE

    7,389.98
    +87.24 (+1.19%)
     
  • NIKKEI 225

    26,739.03
    +336.19 (+1.27%)
     
  • CAD/EUR

    0.7372
    +0.0007 (+0.10%)
     

2 TSX Stocks to Turn a $20,000 TFSA Into $2 Million

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
·3 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
IMAGE OF A NOTEBOOK WITH TFSA WRITTEN ON IT
IMAGE OF A NOTEBOOK WITH TFSA WRITTEN ON IT

Written by Amy Legate-Wolfe at The Motley Fool Canada

If you’re a Motley Fool investor, you likely already have a Tax-Free Savings Account (TFSA). And it’s no wonder. Since 2009, investors have been given contribution room to put cash aside tax-free. That cash can be used for investments, including through dividend stocks.

Dividend stocks in particular have been a huge win for TFSA investors. They can turn a small investment into thousands of dollars. But what if you want millions?

Today, I’m going to look at how long it would take to turn a $20,000 portfolio into $2 million and two stocks to get you there.

The stocks

If you’re going to invest $20,000 right now, you want to make sure you’re investing in companies that will be around decades from now, because it’s going to take a few decades to get to $2 million. For that, I would look to Dividend Aristocrats that remain major competitors in their respective industries.

First, I would look to the Big Six banks. These banks have performed well during economic downturns, recovering to pre-crash levels during the last several downturns within a year. That includes Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM), which offers the highest dividend.

Today, you can pick up CIBC stock for a steal trading at 9.6 times earnings and with a 4.62% dividend yield.

Then there’s the telecommunications sector. There is little competition within this sector, but above them all has to be BCE (TSX:BCE)(NYSE:BCE). It holds the market share of Canadian telecommunications customers and offers a substantial dividend of 5.26% as of writing.

Given that 5G and BCE stock’s wireline business will only see more use, this is a strong stock to pick up for decades of growth.

The strategy

Let’s say you chose to put $10,000 towards CIBC stock and $10,000 towards BCE stock. Over the last decade, shares of CIBC have grown at a compound annual growth rate (CAGR) of 6.87%. Meanwhile, its dividend has grown at a CAGR of 6%.

For BCE stock, the company’s shares have grown by a CAGR of 5.76%, with its dividend rising by a CAGR of 5.41% during that time. So, let’s look at how long that investment would take to reach millions by reinvesting your dividends.

For CIBC stock, if the same performance over the last decade continues, it would take 42 years to reach $1,127,384. That’s with reinvesting dividends but not adding a penny more over the $10,000. The same goes for BCE stock. In this case, it would take 45 years to reach $1,059,831 and pass that million-dollar mark.

However, taken together, if you invested in both over 43 years, you would have $813,240 from BCE stock, and $1,274,283 from CIBC stock. Together, that would create a portfolio worth $2,087,523!

Bottom line

While this is, of course, just an example, because anything can happen, it just goes to show that choosing strong companies can bring in millions — even if you don’t invest another penny after the initial investment. That being said, you could shorten up that time frame significantly by reinvesting in these strong stocks and hitting $2 million much sooner.

The post 2 TSX Stocks to Turn a $20,000 TFSA Into $2 Million appeared first on The Motley Fool Canada.

Should You Invest $1,000 In BCE?

Before you consider BCE, we think you’ll want to hear this.

Our nearly S&P/TSX market doubling* Stock Advisor Canada team just released their top 10 starter stocks for 2022 that we believe could be a springboard for any portfolio.

Want to see if BCE made our list? Get started with Stock Advisor Canada today to receive all 10 of our starter stocks, a fully stocked treasure trove of industry reports, two brand-new stock recommendations every month, and much more.

See the 10 Stocks * Returns as of 4/14/22

More reading

Fool contributor Amy Legate-Wolfe has positions in CANADIAN IMPERIAL BANK OF COMMERCE. The Motley Fool has no position in any of the stocks mentioned.

2022

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting