Long-term vision is crucial for long-lasting wealth creation. Quick stock flips or chasing some hot, speculative company may occasionally yield a reward, but so can a blackjack table.
We shouldn't be gambling with our retirement money. Even a few percentage points of difference in returns can open up a drastic gap in the cash you could be enjoying.
Look at this-
$100,000 getting 5.0% interest compounded monthly over 30 years turns into $446,774. You earned almost $347,000 in interest- doing no work at all on your part.
Compound Interest on $100,000 at 5% over 30 years
Source: moneysmart.gov.au, compound interest calculator
Now, all we're going to do is change the interest rate to 6% – one little percentage point. How much more would you say you can get over the same 30 years? An extra $10,000…$50,000?
Wrong!
You would have racked up more than $150,000!! From 5% to 6%, you could treat yourself to a new car, fantastic vacations, or have more of a comfortable retirement.
Compound Interest on $100,000 at 6% over 30 years
Source: moneysmart.gov.au, compound interest calculator
Wow… a 5% – 6% yield, you could possibly earn that much interest from a high-yield stock's dividend alone!
Imagine how much more you may have with a rising share price to boot.
30 years may seem like a long time, but you will be living that long (and hopefully much longer) anyway, so start paying yourself now. Do you want to do the saving and investing when you're young…or scrimping and penny-pinching in your 70s? That's a no-brainer.
Here are three stocks that pay a high dividend yield and will be around for a long time in business themselves. They may be the ones that help you achieve your comfortable retirement.
— Sydney Airport Limited (ASX: SYD) operates the only international airport in Sydney. There are plans for a second airport to be built and the company has the first right of refusal to build and operate a new airport. Analysts expect it will choose to maintain its monopoly on airport operations in Sydney. Talk about long-term horizons and there are no competitors popping up nearby! Its yield is 5.1% unfranked.
— IOOF Holdings Limited (ASX: IFL) provides financial products and portfolio administration services like superannuation, annuities, investment trusts, as well as offering financial planning and stock broking. It has a 5.0% fully franked dividend yield and has a good track record for increasing dividends. Super and SMSF demand is very high as more people save and prepare for retirement, so this company can grow right along with the superannuation industry.
— Westpac Banking Corp (ASX: WBC) is one of the Big Four banks and offers a yield of 5.1% fully franked. But the kicker for me is Westpac's history of increasing dividends. Over the past ten years it has raised dividends an average annual 9.5%. If they can continue that trend, what do you think the income from the current 5.1% yield will become over the next ten years? You can find out as a shareholder.
