3 actions that could create lasting generational wealth


If you’re looking to create generational wealth or a nest egg that you can pass on to your loved ones, you need to focus on businesses that have survived the tests of time. You should also pay close attention to dividends, as they can boost returns and give you something to hold onto when markets inevitably turn turbulent.

Real estate income (O 1.39%), Bank of Nova Scotia (SNB -0.54%)and Procter & Gamble (PG 0.61%) are all names that should be on your shortlist to build lasting fortune.

1. A step ahead of its peers

Realty Income is a real estate investment trust (REIT) that owns single-tenant properties. Its tenants bear most of the operating costs of the assets they occupy. This is known as a net lease in the industry. Any single property, with a single tenant, is high risk. But out of Realty Income’s more than 11,000 locations, it’s actually a low-risk approach to owning real estate. In particular, the inflation that drives up costs today mainly affects the tenants of the REIT, who must pay the costs of operating the building.

Realty Income has a number of impressive stats behind it. For example, he’s a dividend aristocrat with over 25 consecutive years of annual dividend increases under his belt. The yield is a generous 4.4%. Although heavily weighted to commercial assets (78% of rents), it is exposed to non-commercial properties (the rest) and Europe (around 10% of rents) to add some diversification.

And it has an investment-rated track record and often enjoys a higher valuation. That very last point might sound bad, but it gives Realty Income access to low-cost capital and the ability to grow its portfolio profitably with deals that its peers might not be able to accommodate due to their smaller size and their higher costs. Rarely cheap, Realty Income is a name that’s probably worth paying top dollar for.

2. Canada and beyond

The Bank of Nova Scotia, or Scotiabank as some call it, is one of the largest banks in Canada. Canada has a highly regulated and very conservative banking sector, leaving a small number of banks with entrenched positions. Even if growth is not significant in Canada, it is highly unlikely that Scotiabank will suddenly lose its place in its core market, which gives it a solid footing. Many of the company’s peers have used similar core businesses to push in the US for growth, but Scotiabank has taken a different approach.

About half of the company’s business takes place in Canada, and the rest falls into broader “global” compartments. While a portion is located in the United States, a much larger portion comes from Latin America. This positions Scotiabank in emerging markets which are expected to experience higher growth rates over time. This is a good combination for long term wealth building. Today, Scotiabank offers a very generous return of 5.3% and has paid a dividend every year since 1833!

U.S. investors will have to pay Canadian taxes and dividend payouts will vary with exchange rates, but if you can see the long-term value of exposure to emerging markets, it’s a high-yield bank that you will want to examine.

3. A king of dividends

Procter & Gamble is an iconic brand manager in consumer staples, with a collection of premium labels you’re sure to be familiar with (like Bounty and Gillette). The company has long differentiated its products by investing heavily in research and development to ensure they offer premium benefits to justify their premium prices. Plus, its giant scale means it has the resources to advertise heavily and support strong retailer relationships. It is one of the best managed companies in the commodities industry. Investors know this and tend to put a high price on it.

Right now the yield is 2.6%, which is better than the broader market but not particularly high for Procter & Gamble. For the value-conscious types, it might be best to put it on the watch list in case of a sale. That said, it is a stock worth waiting for. Most notably, its long-term success is evidenced by the fact that it has increased its dividend every year for over 50 consecutive years, making it a Dividend King. And with his entrenched position in the industry, that streak doesn’t seem likely to end anytime soon.

What is remarkable is that Procter & Gamble, like its peers, is going through a period of high inflation. This could lead to a buying opportunity if investor sentiment turns negative.

Slow and steady dividend payers

If there’s a theme running through these three stocks, it’s that they’re all dividend-paying companies that have proven themselves in tough times. Realty Income is the youngest of the bunch, but it’s a dominant name in the REIT space. The Bank of Nova Scotia has used a conservative core business (Canadian banking) to expand into high growth areas. And Procter & Gamble is an industry leader with iconic brands, backing an incredible streak of annual dividend increases. All three should at least be on your watch list, if not your to buy list, today.

Reuben Gregg Brewer has held positions at Procter & Gamble, Realty Income and The Bank of Nova Scotia. The Motley Fool recommends BANK OF NOVA SCOTIA. The Motley Fool has a disclosure policy.


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