EMA:CC - Compounding Interest With Dividends: Top Stocks for Savvy Canadian Investors
2023-10-18 16:40:00 ET
One of the most important lessons Canadians will learn when it comes to investing is that the best strategy is to invest for the long haul and find top stocks you can buy and hold for years.
One of the most common mistakes investors make, especially if they are just starting out, is taking too many risks and trying to grow their capital as fast as possible.
Growing your capital fast is not only extremely difficult and highly unlikely, but the higher risk you need to take in exchange for a chance at a higher return is rarely worth it.
Instead, you’re much better off buying high-quality Canadian stocks that will steadily increase in value over time, allowing you to take advantage of the power of compounding interest.
What is compound interest?
Compound interest is an essential concept to grasp because it allows your money to grow exponentially over time.
As you save and invest your money, you will start earning a return. Compound interest is the interest you earn on the interest (or returns) you’ve already earned. And the longer you invest, the more interest interest you have to invest, allowing your money to consistently grow higher and higher.
The only way to take advantage of compound interest, though, is to start investing as early as possible and to buy safe and reliable stocks that can consistently earn you a return.
And while you can find all types of stocks to buy and hold for years , there’s no doubt that some of the top stocks for Canadian investors to buy are dividend stocks.
Why are dividend stocks some of the best investments for long-term investors?
There are a tonne of advantages to buying dividend stocks, which is why they are some of the top investments that Canadians love to buy.
First off, in order to pay a dividend, companies have to be consistently profitable. So often, dividend stocks are more established than non-dividend paying stocks, giving them less risk since they’ve already proven they can turn a profit.
Another reason why dividend stocks are some of the top investments for Canadians is that they allow you to take the cash that you are receiving and reinvest it however you want. You can decide to use that cash to reinvest in the same stock that paid you the dividend, or you can use it to add a completely new stock to your portfolio.
And the more you continue to reinvest, the more compound interest you can potentially gain. Not to mention, the highest quality dividend stocks will consistently be increasing their dividends each year, which can help boost your portfolio growth even more.
So, if you’re looking to start investing for the long haul, here’s one of the top dividend stocks that savvy Canadian investors can buy today.
One of the top dividend stocks for Canadian investors to buy now
There are several high-quality dividend stocks that Canadian investors can buy for their portfolio, but one of the best to consider, especially if you’re just starting out, is Emera ( TSX:EMA ).
Emera is a utility stock, and utility stocks are well-known as some of the safest and most defensive investments you can make. Therefore, Emera is an ideal stock to start with, considering the low risk the stock has as well as the attractive dividend it pays to investors.
The reason why utility stocks are so defensive is that they are highly regulated by governments, and the services they offer are essential, meaning they are less immune to shocks in the economy than businesses in almost every other sector.
Emera, specifically, is a massive stock with nearly $40 billion in assets that serves roughly 2.5 million customers across six different countries in North America and the Caribbean.
Plus, after rising interest rates have caused Emera to sell off slightly and consequently caused its dividend yield to increase, investors can now buy the stock today and lock in an impressive 6.1% yield. And not only is that yield attractive, but Emera has also increased its dividend for 16 straight years now.
So, if you’re looking to buy top Canadian dividend stocks and take advantage of compounding interest, Emera is an ideal company to start with.
The post Compounding Interest With Dividends: Top Stocks for Savvy Canadian Investors appeared first on The Motley Fool Canada .
Fool contributor Daniel Da Costa has no position in any of the stocks mentioned. The Motley Fool recommends Emera. The Motley Fool has a disclosure policy .
2023