Written by Christopher Liew, CFA at The Motley Fool Canada
Becoming a millionaire from stock investing is possible if you have time, money, and an actionable plan. The third item is crucial, because it pertains to the actual stock holdings. Also, the starting point to any million-dollar journey is disciplined saving and patience.
Canadian Natural Resources (TSX:CNQ) and Freehold Royalties (TSX:FRU) in the energy sector are dependable dividend payers, despite the sector’s current weakness. Fortis (TSX:FTS) is a safe utility stock for its defensive qualities, while Doman Building Materials (TSX:DBM) is well positioned to benefit from the construction industry’s revival.
Despite the varying dividend yields, the four TSX stocks can help you get to millionaire status in a longer investment horizon.
Reliable dividend payers
Canadian Natural Resources and Freehold Royalties belong to the oil and gas industry but have different operations. The former is a crude oil, natural gas, and natural gas liquids (NGLs) producer and seller. The latter owns and manages royalty lands where industry players drill and develop oil and gas.
CNQ, a large-cap stock ($79.8 billion market cap), trades at $73.13 per share (-1.47% year-to-date gain) and pays a 4.83% dividend. While Freehold’s market cap is only $2.1 billion, at $14 per share (-8.89%), the mid-cap stock pays a mouth-watering 7.53% dividend.
Besides the price, market cap, and yield, the dividend-payout frequency is another difference. CNQ pays every quarter, while Freehold pays regular monthly dividends. An $82,750 position each ($165,500 total investment) can compound to $1,000,183.37 in 30 years.
Please note that we at the Fool prefer a more diversified portfolio and don’t recommend putting such a large sum into only one or two stocks. Instead, we suggest you mix and match a diverse group of dividend-paying stocks to achieve your target yield.
Soon-to-be Dividend King
With a dividend-growth streak of 49 years, Fortis is a step away from becoming TSX’s second Dividend King after Canadian Utilities. The stock is the top choice of risk-averse investors. The $27.66 billion electric and gas utility company derives 99% of its revenues from a highly regulated asset base (10 utility operations).
At $57.10 per share (+7.46% year to date), the 3.98% dividend yield isn’t the highest in the market. Still, Fortis is ideal for dividend-growth investors. Because of the new $22.3 billion capital plan (2023 to 2027), management commits to annual dividend growth of 4-6% through 2027. In the first quarter (Q1) of 2023, net earnings climbed 24.85% to $437 million versus Q1 2022.
Cheap, high-yield option
Doman is a lucrative prospect, especially to investors expecting a construction boom. The $569.1 million company is North America’s leading distributor of building materials. In Canada, it’s the only fully integrated national distributor in the building materials and related products sector.
Because of the highly volatile pricing environment and lower wood products pricing, net earnings in Q1 2023 fell 64.5% year over year to $14.91 million. Nonetheless, its board chairman Amar S. Doman said, “We continue to see reasonable demand, along with price volatility in certain categories, which is familiar territory for our team, as we remain focused on growth and overall cost management.”
Interestingly, Doman outperforms CNQ, Freehold, and Fortis with its 16.38% year-to-date gain. At only 6.55% per share, the dividend offer is an eye-popping 8.55%.
Power of compounding
The sample computation on the energy stocks should give you an idea of how money grows over time. Apart from the extended period, investors building wealth or chasing $1 million reinvest the dividends to realize the power of compounding.
The post Millionaire Makers: 4 TSX Stocks to Help You Get There appeared first on The Motley Fool Canada.
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Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends Canadian Natural Resources, Fortis, and Freehold Royalties. The Motley Fool has a disclosure policy.