Don't Miss AI's Third Wave
Small investments made consistently over a lengthy period of time could compound and grow into sizeable wealth holdings. Individuals shouldn’t wait too long to start investing – lost opportunities may never be recovered. Small regular investments of $500 a month could potentially change one’s financial position a decade from now, and help build a comfortable retirement nest egg.
TELUS Corp (TSX:T) is one of three TSX stocks I’d confidently buy with a $500 capital allocation right now. A real estate investment trust (REIT) adds diversification to a stock portfolio. The third growth stock could become a sizeable income-producing investment holding once its royalty portfolio assets graduate to production stages. Lets’s take a closer look.
TELUS Corp
TELUS is a dividend great that’s growing revenue at near double-digit rates lately, yet TELUS stock trades near pre-pandemic price levels. The dividend yield on the telecommunications giant hovers above 6.1% today. Investors could require a mere 1% annual growth in TELUS stock price to double their capital over the next decade, with full dividend reinvestment.
One rule of thump, the Rule of 72, predicts that you only require a 7% average annual total return on investment. TELUS’s high yield dividend, high revenue growth rates (relative to its mature industry), and commitment to annual dividend raises could allow investors to more than double their wealth in a much shorter period.
Bay Street analysts project a 7.1% average annual growth rate in TELUS earnings per share over the next five years. The average analyst price target on TELUS stock of $29.16 implies a 21.6% potential upside over the next 12 months.
Consider that $500 invested in TELUS stock 10 years ago could have more than doubled to more than $1,150 today, with full dividend reinvestment.
Morguard North American Residential REIT
A small investment of $500 can easily make one a residential properties landlord, and the beneficiary of proceeds from monthly rentals for decades to come. Morguard North American Residential Real Estate Investment Trust (TSX:MRG.UN) is one of the most capitalized and increasingly profitable REITS to buy for passive income, capital growth, and added portfolio diversification into real estate.
The REIT reported 26% year-over-year growth in net operating income (NOI) during the second quarter of 2023. Same property NOI increased by 16% in Canada and 6.4% in the United States due to rent increases and resilient portfolio occupancy rates.
The trust’s financial position is strong given a low debt ratio of 38.4%, weighted average interest rate of 3.65%, and long mortgage loan maturities averaging 5.2 years. Rising interest rates have not had a significant impact on the REIT’s finances since last year.
The trust’s monthly distributions currently yield 4.5% annually. It paid out 42.5% of its funds from operations (FFO) last quarter – a significant improvement from 49.7% during the same period last year. Recurring rental income adequately covers the REIT’s distributions, enabling it to augment the passive income-generating power of investor portfolios.
A $500 investment in Morguard North American Residential REIT’s units 10 years ago could have grown to almost $1,380 today, with full reinvestments of monthly distributions.
A Canadian lithium stock to buy: Lithium Royalty Corp
Lithium Royalty (TSX:LIRC) is a recent Canadian initial public offering (IPO) stock that had a bad start on the TSX as it coincided with a drop in lithium prices. Shares have traded 25% lower since the March 2023 IPO. However, the company’s growing royalty portfolio is largely skewed towards future lithium revenue receipts, and thus widely decoupled from current lithium prices.
Lithium Royalty stock could be one of the best low-risk options to play the long-term lithium growth theme as electric vehicle (EV) production skyrockets and EV battery demand soars this decade. Royalty contracts insulate the company from rising projected development costs. However, Lithium Royalty will fully participate in lithium revenue upside once mining projects come online
The company’s quarterly revenue surged by 98% by June, and gross income increased by 280% year over year after a new royalty asset began production recently. Most of the low-risk 32 royalties in its portfolio are yet to graduate from the development stages. Once they do, the company could easily become a dividend stock with strong upside potential.
