2 Stocks to Transform $50,000 Into Enormous Wealth Today
Written by Christopher Liew, CFA at The Motley Fool Canada
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.
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.
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.
The post 2 Stocks to Transform $50,000 Into Enormous Wealth Today appeared first on The Motley Fool Canada.
Should You Invest $1,000 In Sienna Senior Living Inc.?
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Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends Stella-Jones. The Motley Fool has a disclosure policy.