Tag Archives: TSX:SJ

Retire Early With These 3 High-Growth Stocks

Buying high-growth stocks can double your money faster. And now’s your opportunity to buy three such stocks at great valuations.

Since the stock market returns 10% (inflation included) on average, I consider high-growth stocks as companies which are expected to grow their earnings by more than 10% a year.

High-growth healthcare stock

CVS Health Corp (NYSE:CVS) was founded in 1963. It is one of the largest pharmacy benefit managers in the United States with nearly 80 million plan members.

CVS logo

Additionally, CVS is diversified by its more than 9,600 retail pharmacies, more than 1,100 walk-in medical clinics, and dedicated senior pharmacy care business which serves over one million patients a year.

After hitting an all-time high of US$112 per share and an outrageous price-to-earnings ratio (P/E) of about 23 in July 2015, CVS’s shares are finally trading at a decent valuation. It trades at a P/E of 15.3 at about US$87 per share.

Although CVS only yields 1.9%, it can continue growing its dividend per share (DPS) at a double-digit rate like it has for the last 11 consecutive years.

Its payout ratio is only 29% and coupled with growing earnings, its dividend is very safe. Analysts expect it to grow its earnings per share (EPS) by 12.2-14.4% per year in the next three to five years. Read More

Growth Or Dividends: What Should Young Investors Focus On?

It’s not as simple as just focusing on dividend or growth investing. What are the fundamentals of the business underlying a stock? It’s important not to overpay for a business. For dividend investing, there are ways to improve the safety of your dividend.

Dividend-paying multi-baggers that are priced for purchase today will be used as examples, including one Canadian Basic Materials company and one U.S. company.

I came across an article written by Financial Samurai (or Sam), who worked in the finance industry for 13 years. The article was titled: Why It’s Better To Invest In Growth Stocks Over Dividend Stocks For Younger Investors.

It takes a lot of capital to generate meaningful income

Sam starts off saying: “Even if you have a $500,000 dividend stock portfolio yielding 3% that’s only $15,000 a year.”

Indeed, there are different ways to double your money. It’s a matter of if you want to focus more on income or growth.

Young people are better off focusing on growth stocks

Sam opines that:

“If you’re relatively young, say under 40 years old, investing the majority of your equity exposure in dividend yielding stocks is a suboptimal investment strategy.”

He continues that:

“Out of the few multi-bagger return stocks I’ve had over the past 16 years, none of them have been dividend stocks.”

Although none of the multi-baggers he owned were dividend stocks, there are always examples if you look for them.

Growth stocks can also pay dividends

Stella-Jones Inc. (TSX:SJ) started paying a growing dividend in 2005. Since then, the stock has appreciated 2,800% – a dividend-paying 29-bagger! Here’s the stock analysis on Stella-Jones. Read More

5 Ways to Save and Earn More from Investing Early

Everyone knows the earlier you invest, the more you save. But there’s so much more to it. I’ll also let you in on a little secret about quality companies. Of course, it’s not a complete discussion about investing early if I don’t illustrate the essential concept of compounding…

saving, investing, and compounding

Source: ccPixs.com

The earlier you invest, the more you save

You may think that it is a no brainer that the earlier you invest, the more you save. But actually, there are two aspects to it.

All of you already know that if you start saving $1,000 every year, that in 10 years, you’ll have saved $10,000. If you start saving five years later, in 10 years, you’ll only have $5,000.

The second aspect is that, the earlier you invest those amounts, the sooner your money starts to work for you. And that’s where compounding comes in. I’ll talk more about compounding in the last point.

In essence, if your end goal is to accumulate $5,000,000 of assets, the earlier you start investing, the less money you need to draw out from your own pocket.

However, the bottom line is that you never lose money, which is one of the 5 Important Investing Concepts.

To reduce the chance of losing money, buy quality, stable companies at reasonable valuations. What’s value? Ben Reynolds wrote a great article about Value + Growth + Dividends = Dividend Growth Investing that explains about value and other goodies.

Quality companies become more valuable over time

Quality, stable companies become more profitable and valuable over time. Given the time-value of money, the earlier you invest in a great company, the cheaper it is.

In the 10-year period of August 31 2006 to 2016 Stella-Jones Inc.’s (TSX:SJ) total returns were 814% or an annualized rate of return of 24.8%. $10,000 invested on August 31, 2006 would have grown to $91,407.

Of course, the hard part is identifying great companies early. Stella-Jones have only paid a growing dividend for 11 years. Given that some dividend-growth investors don’t invest in a dividend-growth stock until it has at least a five-year dividend-growth streak, an investor might have bought Stella-Jones six years ago.

Even so, from August 31, 2010 to 2016, a $10,000 investment in Stella-Jones would have grown to $83,933 for a total return of 539% or an annualized rate of return of 36.2%.

So, don’t shrug off a great company just because you missed the first parts of its growth. If it’s really the quality company that it is, it should continue to deliver.

Identifying the right companies for your portfolio is an essential step but don’t forget to check their valuations to ensure they’re not too expensive. If you overpay for even the greatest company, your returns will suffer.

Is Stella-Jones a good investment today? Check out my recent growth stock analysis on Stella-Jones to find out. Read More