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We'd all love to find an investment that could quickly transform a small amount into great wealth so we can retire early. While it is possible to find such wealth creators, it's impractical to bet one's retirement on that pursuit. Instead, finding steady wealth creators is a more sure-fire way to build retirement wealth. While this approach will take several years, the odds of success are excellent. Here are three stocks to get you started on that journey.
The real estate mogul
Brookfield Property Partners (BPY) is one of the world's largest commercial real estate investors. The company currently controls $66 billion of real estate assets around the globe, centered around a core portfolio of premier office and retail properties. That core business provides the company with very stable income, which Brookfield uses to support a generous quarterly distribution that currently yields 5%.
Brookfield Property Partners intends to grow that payout by 5% to 8% per year through a combination of organic growth initiatives. For example, it plans to spend several hundred million dollars on redeveloping some of its office and retail properties over the next few years to increase rents. In addition, the company has nearly $6 billion of development projects underway, including the construction of new core office properties in several important markets and a nearly $1.6 billion buildout of a core urban multifamily portfolio. Finally, Brookfield has invested in several opportunistic real estate classes, including suburban multifamily, student housing, self-storage, and hospitality properties, which have the potential to deliver increasing rents and capital appreciation. Brookfield believes that its diversified strategy can achieve 12% to 15% returns on equity over the long term, which could triple its value over the next 10 years.
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The energy infrastructure giant
North American energy infrastructure giant Enbridge (ENB -2.31%) offers similarly steady financial results because fee-based contracts underpin 96% of its cash flow. Enbridge typically returns half of that cash to investors via a dividend that currently yields 3.7%. It reinvests the other half into new fee-based assets, which grows its cash flow stream.
Enbridge has $20 billion of growth projects under development at the moment, which should increase its available cash flow by 12% to 14% per year through 2019. Meanwhile, it has another $37 billion of projects waiting in the wings to drive growth early next decade. These projects support the company's view that it can increase the dividend by 10% to 12% per year through 2024. Meanwhile, the company believes that its current yield plus earnings growth could support 16% annual returns for investors. These compounding returns have the potential to create a tremendous future cash flow stream for long-term investors.
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The global connector
American Tower (AMT -3.32%) also generates very stable revenue by leasing space on its communications towers to customers. These clients typically sign long-term contracts and often pay many of the associated expenses. That leads to relatively predictable revenue for American Tower, enabling it to pay a sustainable dividend that currently yields more than 2%.
American Tower expects to grow its revenue streams by adding more tenants to its towers as well as building or buying additional towers. Driving the need for more tower space is rising data demand by smartphone and tablet users as well as the rapid increase in machine-to-machine data transfers (i.e., Internet of Things). Data usage from those machines in the U.S. alone is expected to grow from just 34 million lines in 2012 up to 639 million lines by 2019. Meanwhile, total U.S. mobile traffic data is projected to increase sixfold through 2020. These trends should enable American Tower to continue growing its tower rental streams at a robust rate, with the company positioned to continue expanding revenue and cash flow by the same mid-teens compound annual growth rate it has captured since 2007.
Investor takeaway
These three stocks have two things in common: They each generate stable cash flow and have clearly visible opportunities to grow at a healthy clip over the next several years. As a result, these companies should provide investors with ample capital appreciation and income growth, which is a perfect combination for a retirement-focused investment. While they will not make an investor rich overnight, they could increase one's wealth quite a bit over the long term.
