Are You Starting a Stock Portfolio? If Yes, Keep It Safe and Simple
First-time investors should keep their stock portfolios safe and simple by holding time-tested, income-producing assets. The post Are You Starting a Stock Portfolio? If Yes, Keep It Safe and Simple appeared first on The Motley Fool Canada.
Itâs never too late to start investing in stocks and build a portfolio. Canadaâs primary stock exchange is underperforming thus far in 2022, but it doesnât mean we are in a bear market. The TSX must fall 20% to make it official. As of mid-August 2022, the year-to-date loss is only 4.9%.
The suggestion to first-time investors is to keep it safe and simple. Warren Buffett, the GOAT (greatest of all time) of investing, said, âNever invest in a business you cannot understand.â If you follow his advice, youâre on the right track if the stocks in your starter kit are the Royal Bank of Canada (TSX:RY)(NYSE:RY) and BCE (TSX:BCE)(NYSE:BCE).
More Buffett advice is, âDonât watch the market closely.â With RBC and BCE, you donât have to because the former is Canadaâs largest bank and the latter is the most dominant player in the telco industry. The Big Six Bank and 5G stock are not only for long-term investors but also beginners.
Both companies have the financial muscle to weather market storms and economic downturns. They are excellent passive income providers paying attractive dividends. Furthermore, their dividend track records are more than 100 years old.
The RBC economics team warns that stronger-than-expected inflation continues to force central banks into aggressive action. The Bank of Canada will announce its next rate decision on September 7, 2022. While global price pressures appear to be easing and inflation is close to peaking, RBC analysts say it wonât slow significantly to the Fedâs target range without a weaker economy.
Earning passive income is important as ever because inflation erodes purchasing power. RBC is trading at $128.45 per share (-1.71% year to date) and pays a 3.99% dividend yield.
The total return of 49,361%, or 13.3% compound annual growth rate (CAGR), in 49.7 years is enough justification to invest in this Big Bank stock. In fiscal 2021, RBCâs net income of $16 billion was 40.3% and 24.7% higher than in fiscal years 2020 and 2019, respectively.
BCE needs no introduction as everyone knows that its telecom products and services are essential to people and businesses. The $59.6 billion company is a cash cow and dividend machine. The companyâs average EBITDA growth rate has increased to 5.3% over the past 12 months, versus a 3-year EBITDA growth rate of 2.1%, as it large investments in 5G and fiber-to-the-home begin to payoff with high mobile phone and internet subscriber growth.
If you take a position today, the share price is $64.85 (+1.3% year to date), while the dividend yield is a hefty 5.71%. Like RBC, BCE is for keeps. The telco stockâs total return in 46.7 years is an impressive 77,674 (15.3% CAGR).
Mirko Bibic, President and CEO of BCE and Bell Canada, said, âThe Bell team continues to deliver for all the stakeholders we serve.â While net earnings in Q2 2022 declined 10.9% versus Q2 2021, free cash flow (FCF) increased 7.1% year over year to $1.3 billion.
Reinvest the dividends
The average dividend yield of RBC and BCE is 4.85%. Assuming you allocate $5,000 to each stock, the pair will produce $121.25 in passive income every quarter. That amount isnât bad for starters. If you donât collect the dividends and instead reinvest them, the value of your investment should compound considerably over time.
The post Are You Starting a Stock Portfolio? If Yes, Keep It Safe and Simple appeared first on The Motley Fool Canada.
Before you consider BCE, you’ll want to hear this.
Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in August 2022 … and BCE wasn’t on the list.
The online investing service they’ve run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 27 percentage points. And right now, they think there are 5 stocks that are better buys.
See the 5 Stocks
* Returns as of 8/8/22
setButtonColorDefaults("#5FA85D", 'background', '#5FA85D'); setButtonColorDefaults("#43A24A", 'border-color', '#43A24A'); setButtonColorDefaults("#fff", 'color', '#fff'); })()
- BCE Stock: A Great Pick to Boost Your RRSP Retirement Fund
- New Investors: Follow the KISS Model With These 3 TSX Stocks
- 3 Canadian Dividend Aristocrats to Buy for Passive Income Forever
- 2 Top Canadian Dividend Stocks to Buy Now for a Self-Directed RRSP
- TFSA Investors: How to Turn $40,000 Into a $740,000 Tax-Free Pension
Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.