Andreas Knoop
·4 minutes reading
Written byAndreas Knoopvan The Motley Fool Canada
Did you know that you can achieve significant returns by investing just €100 per week?
Of course, you need to invest these $100 amounts consistently over a period of time. But if you stick with it, you can get to the point where you're earning $1,500 in annual dividend income after just three years of diligent saving. In this article I explore the numbers behind it and suggest some stocks that can make this happen for you.
$100 a week equates to $15,600 in three years
The first thing we need to know is how much $100 a week works on an annual basis. There are 52 weeks in a year. This means that after a full year of saving, €100 per week equates to $5,200. There is no sensible stock that will make you $1,500 a year on $5,200 invested - that's a 28% return! — but there are stocks that can get you there after three years of saving. That gives you a cumulative savings of $15,600.
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If you save $15,600, you would need a 10% dividend to get $1,500 per year. While a 10% return is very high, it is not so high that a stock yielding that much is necessarily very risky. Personally, I have a 10.3% dividendSpecial loans from Oaktree, and if you look at its historical financials and portfolio composition, you'll see that it's far from an unusually risky company. It's a stock you can invest in to get your $1,500 in dividend income, but since this is a Canadian publication, we need to look at some Canadian stocks that can generate $1,500 annually.dividend incomewith $15,600 invested.
A share that can take you there
First national financial(TSX:FN) is a Canadian non-bank lender with exceptionally high returns. At current prices that is 6.3% – not enough to make the calculations in the previous section work, but it could get there. You can see that FN's dividend has grown over time. Over the past five years, the company has grown its dividend at 5.3% per year. It has increased its dividend for twelve years in a row. If FN were to continue increasing the dividend by 5.3%, it would reach a 10% dividend at expense in eight years. It may sound like quite a task to have to wait eight years for a stock to achieve the desired return, but it does not necessarily have to take that long.
COMPANY | LAST PRICE | NUMBER OF SHARES | YIELD | TOTAL PAYOUT | FREQUENCY |
First national financial | $39,34 | 615 | $0.61/quarter ($2.44/year) | $ 1.500,6 | Quarterly |
In the most recent quarter isFirst delivered nationallythe following:
$129 billion in mortgages under administration, up 10%
$563 million in revenue, up 26%
$95.5 million in sales minus the effect of changes in fair value, an increase of 98%
$83.6 million in net profit, up 108%
$1.38 in diluted earnings per share, up 109%
This is much better growth than what First National did for most of the last five years, when it grew its profits at just a 7% CAGR. Thanks to high interest rates, the UN is growing its revenues faster than in the past when interest rates were low. So it could be able to increase dividends at a faster pace in the future. If so, it could provide a 10% return for those who buy it today.
By postHow to invest $100 each week can generate $1,500 in annual dividend incomeappeared firstThe motley fool Canada.
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Silly contributorAndreas Knoophas no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has onedisclosure policy.
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