Talking with my 60-year old brother the other day about approaching retirement age, he wondered if he had enough saved in superannuation and annuities. His house is mostly paid off, so that's a plus for him if he ever decides to sell it later on. Money-wise, he really can't do too much more, except keep working well after 65.
Young investors in their 20s and 30s, however, have a great opportunity to invest now and make a big difference in their future wealth.
If you could save and invest $500 monthly (a little over $100 a week) and get an average annual 8% return on your investments for 30 years, you'd be surprised at the final total you'd have. According to the moneysmart.gov.au compound interest calculator, you would have saved $180,000 and earned almost $500,000 in interest, giving you a total value of about $680,000.
Imagine that coming from such a small weekly sacrifice of money!
To help build up your future wealth, you'll need steady, reliable dividend stocks to assure a suitable rate of return. That's where blue-chip stocks come in. These are well-established companies with reasonable growth and generous dividend yields. They are built to be in business decades from now, just the right time length for your retirement.
Here are two blue-chips that could play a part in growing your future dividend wealth.
1) Australia and New Zealand Banking Group (ASX: ANZ)
This well-known big four bank has a steady, growing business in Australia, but one of the bank's big goals is to expand in Asia where there are large populations in quickly developing countries. That makes for huge earnings potential from growing financial services needs.
Currently, the stock pays a big 5.8% fully franked yield, so you'd only need a reasonable annual share price gain to hit our money example's 8% return. Dividend growth is important as well. Over the past 10 years dividends have risen around 5.5% annually on average.
2) Sydney Airport Holdings Ltd (ASX: SYD)
The owners of the Sydney Airport have a long-term growth horizon and little competition. With a virtual monopoly on air travel infrastructure in Sydney, the company can generate stable income streams for years. There are plans to build a second airport in Sydney, but Sydney Airport Holdings has the right of first refusal to develop and operate it. That means the company gets the first opportunity to decide to build it, thus potentially keeping control of any new income streams and blocking out rivals for decades.
The stock yields 4.8% unfranked, yet is at a very high 48 price-earnings ratio because earnings are forecast to rise greatly. The airport and the company will be around for a long, long time, so it won't hurt to wait a little while longer before starting a position at a better entry price. Still, it is an attractive long-term investment proposition.
