Don't Miss AI's Third Wave
It takes determination, persistence, and strategy to achieve $1 million. When it comes to stock investing, it requires consistent savings and investing. Surely, you could invest a lump sum of $50,000 today for total returns of 12% per year to arrive at $1 million in less than 27 years. Investing a lump sum of $100,000 for the same rate of return would result in $1 million in a little over 20 years. Most of the time, people don’t have this kind of windfall. More commonly, investors achieve sizeable wealth via regularly saving and investing, and allowing the investments to compound over time.
Now is a good time to invest in stocks for long-term returns. There’s a good chance that the stocks discussed will deliver total returns of at least 12% per year over the next five years. (Notably, the farther out a projection is into the future, the more inaccurate it would be.)
Canadian Pacific Kansas City
Over the last 5 and 10 years, Canadian Pacific Kansas City (TSX:CP) has outperformed the Canadian and U.S. stock market in total returns. Moreover, it has underperformed in the last one and three years. So, it could be a good entry point.
According to Morningstar, CP’s recent return on equity (ROE) has lowered, to about 13.9% in 2021 and 9.7% in 2022 versus its five-year ROE of 26.2%. Similarly, its return on assets and return on invested capital also declined in the last couple of years. These could be some of the reasons for its underperformance in the last few years.
Since Canadian Pacific completed the merger with Kansas City Southern in April 2023 and expanded its footprint into Mexico as a result, it could reignite higher growth over the next five years. In fact, analysts are estimating earnings-per-share growth of about 14.7% per year over the next three to five years, which makes the $101.55 per share growth stock reasonably priced at a PEG ratio of 1.8.
CPKC doesn’t provide much dividend income. For more passive income, I’d consider a higher-yield name like Brookfield Infrastructure Partners L.P. (TSX:BIP.UN).
Brookfield Infrastructure Partners L.P.
After reporting solid third-quarter results, the oversold top utility stock jumped about 22% last week. The dividend stock is still meaningfully undervalued for income and returns. At $36.96 per unit, BIP.UN stock offers a cash distribution yield of about 5.7%.
According to TMX, the recent 12-month analyst consensus price target of $53.49 represents a discount of over 30%. BIP is committed to growing its cash distribution by 5–9% per year – something it has done for the last 15 years or so.
Year to date, the globally diversified infrastructure company witnessed 8.5% growth in its funds from operations per unit. It also has the capital to invest in quality assets at good valuations in the current macro environment. The transnational railway’s recent investments include data centres and a leading global logistics business.
goeasy
goeasy (TSX:GSY) is here to stay as a leading non-prime Canadian consumer lender. In fact, it could potentially gain more business in the current environment where Canadians are being hit with higher interest rates. The company is committed to helping its customers improve their credit ratings and lower their overall interest expense.
The stock provides a good balance of dividend income and growth potential. It is also decently valued. At about $120 per share at writing, it offers a dividend yield of 3.2%. At this price, according to TMX, the recent 12-month analyst consensus price target of $154.61 represents a discount of approximately 22%.
