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Dividend investing is a meaningful way to build wealth, and regardless of the investment amount, your money will grow over time through the power of compounding. However, a larger capital commitment can transform into enormous wealth.
Assuming you have $50,000 to invest, Stella-Jones (TSX:SJ) and Sienna Senior Living (TSX:SIA) are worthy wealth-builders for their strong fundamentals, enduring businesses, and rock-steady dividends.
Infrastructure play
Stella-Jones is a solid infrastructure play with a resilient business model. The $3.6 billion company is North America’s leading manufacturer of industrial pressure-treated wood products. Its lead products – utility poles, railway ties, and residential lumber – are growth drivers. The other business segments are industrial products, and logs and lumber.
Many non-essential businesses had to minimize or halt operations during the COVID-19 breakout but not Stella-Jones. The lumber supplier needs to operate and continue providing essential services for the operation and maintenance of transportation systems and critical infrastructure.
At $61.53 per share, the year-to-date gain is 27.4%, while the one-year price return is 76.5%. The current share price is 174.8% higher than the stock’s COVID-low of $22.39 on March 23, 2020. While the dividend yield is a modest 1.55%, the quarterly payout is super-safe.
Stella-Jones’ growth momentum in 2022 carried over to Q1 2023. In the three months that ended March 31, 2023, net income rose 30% to $60 million versus Q1 2022. Infrastructure-related businesses posted impressive 18% organic sales growth, and the utility poles product category’s organic sales increased by 29%.
According to its President and CEO, Éric Vachon, Stella-Jones’ ongoing proactivity in securing fibre supply, increasing pole production capacity, and financial strength supports growth. The immediate plan is to invest in the business, grow infrastructure-related businesses, and seek expansion opportunities.
Management said Stella-Jones is well-positioned to meet or exceed its financial objectives for 2024. It projects utility pole sales to grow at a compound annual growth rate of 20% from 2022. Also, infrastructure-related businesses would account for 75% to 80% of total sales.
Remarkable turnaround
Sienna Senior Living had to contend with several factors, such as rising coronavirus infections, closure of residences, staffing challenges, and declining occupancy rates in 2020. Nevertheless, the $840.3-million provider of senior living and long-term care (LTC) services recovered remarkably from the market crash.
From a net loss of $24.5 million in 2020, Sienna turned the corner to post net incomes of $20.7 million and $10.7 million in 2021 and 2022, respectively. As of Q1 2023, the occupancy rates of the retirement residences and LTCs are 88.2% and 85.4%, compared to 81.3% and 84.8% in 2020, respectively.
The best part is that Sienna kept investors whole on the monthly dividend payments throughout the crisis until the present. If you invest today, the share price is 11.52 (+8.64% year to date), and the dividend yield is a mouth-watering 8.11%.
Power of compounding
The share price, yield, and payout frequency of Stella-Jones and Sienna Senior Living are different, although the dividend per share ($0.93) is the same. Your allocation could be 404 SJ shares and 2,183 SIA for a total investment of $50,006.28.
Your initial capital would grow to $160,182.46 over a 20-year holding period through the power of compounding. This return assumes you reinvested the dividends four (SJ) and 12 (SIA) times in a year.
