How to Turn $10,000 Into $150,000 in 25 Years

The market correction is difficult to watch, but it gives investors a chance to buy great TSX stocks at undervalued prices. A popular strategy for creating wealth for retirement is to build a balanced portfolio of high-quality dividend stocks and use the dividends to buy new stocks. This harnesses the power of compounding and can turn modest initial investments into significant savings over time.

TD Bank

TD (TSX:TD) is Canada’s second largest bank by market capitalization. The company is known to Canadian investors for its domestic retail banking business. However, TD actually has more stores south of the border, and its American business is expanding. TD is about to buy First Horizon for $13.4 billion. The deal will add more than 400 branches to the current American business and place TD among the top six banks in the US market. Existing US retail banking contributed 29% to reported earnings for the third quarter (Q3) of fiscal 2022.

This is important for investors who like the long-term prospects for the US economy and want to participate in the country’s economic growth through a top Canadian stock.

TD has paid a dividend in each of the last 164 years, and the board increased the payout by 13% for fiscal 2022. Since 1995, the compound annual dividend growth rate has been about 11%. That’s good news for investors who use the dividends to buy new stocks. At the current share price of $84, the stock offers a dividend yield of 4.25%. TD traded as low as $109 earlier this year.

A $5,000 investment in TD stock 25 years ago would be worth $75,000 today if the dividends were reinvested.

v. Chr

v. Chr (TSX:BCE) is another top dividend stock that currently looks oversold and offers an attractive dividend yield of 6.3%. The share price is currently $58 compared to $74 in April.

BCE derives most of its revenue from essential fixed and mobile services. Households and businesses need Internet access and mobile phone connections regardless of the economic situation. This makes BCE a good stock during an economic downturn.

BCE has the authority to increase prices if its costs increase. This is good news for investors in the current era of high inflation.

The company is spending $5 billion on network upgrades in 2022 to protect BCE’s broad competitive advantage while preparing the company for reasonable revenue and cash flow growth in the years to come. BCE is expanding its 5G mobile network and is rolling out fiber optic lines directly to the buildings of another 900,000 customers this year.

A $5,000 investment in BCE stock 25 years ago would also be worth about $75,000 today if the dividends were reinvested.

The quintessential top dividend stocks to buy now

TD and BCE pay attractive dividends that should continue to grow. The stocks are good examples of how investors can harness the power of compound interest to build wealth, and both still deserve to be the core picks in a diversified pension fund. The TSX is home to many great dividend stocks that are now trading at undervalued prices and should deliver strong total returns for years to come.