Compound interest is an amazing thing. A monthly investment of $300 could grow into $1 million in 30 years if it can earn a 12% average annual return. While that might sound like a lot, it's only slightly higher than the stock market's average return of around 10% over the last three decades.
Three stocks that could deliver that level of return in the coming decades are Brookfield Infrastructure (BIPC 1.39%) (BIP 2.21%), Clearway Energy (CWEN 1.19%) (CWEN.A 1.51%), and Realty Income (O 0.55%). Investing $100 across all three each month could really add up over the next 30 years.
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An excellent wealth creator
Brookfield Infrastructure has been a big-time wealth creator. The global infrastructure operator has generated an impressive 18% annualized total return since its inception in 2008. That's well ahead of the S&P 500's 11% annualized total return during that period.
A big key to its success has been the company's ability to steadily increase its dividend. Brookfield has boosted its payout for 13 consecutive years, growing it at a 10% annual pace during that timeframe. Fueling the dividend's rise has been the company's ability to steadily expand its infrastructure portfolio by completing value-enhancing acquisitions and development projects. That's helped grow its funds from operation (FFO) per share at a 15% compound annual rate since its formation.
Brookfield should have no shortage of growth opportunities in the coming years. Given the enormous investment needed to improve and expand global infrastructure, countries have to invest trillions of dollars in the coming years on infrastructure. Brookfield has already made several new investments in recent months, including buying a Canadian energy infrastructure company and an Australian utility. These and future deals should enable Brookfield to grow its 3%-yielding dividend by 5% to 9% per year and deliver even faster FFO per share growth. That forecast suggests Brookfield could provide low-to-mid teens total annualized returns in the coming years.
Powerful growth ahead
Clearway Energy has done a solid job growing shareholder value over the years. The clean energy producer has delivered an 11.9% total annual return since its initial public offering (IPO) in 2013.
The company could generate even higher total returns in the coming years. Given the accelerated shift toward renewable energy, the global economy needs to invest trillions of dollars on new renewable energy projects over the next 30 years. That should supply Clearway with a steady stream of investment opportunities.
The company currently has enough investments in the pipeline to support dividend growth toward the upper end of its 5% to 8% annual target range through at least 2026. With a more than 3.8% dividend yield, that growing income stream alone can supply an attractive return. Add in the long-term upside of renewable energy, and Clearway could deliver total annual returns in the double digits in the coming decades.
A long history of growing value
Realty Income has also done an excellent job growing wealth for its investors. Since its IPO in 1994, the real estate investment trust (REIT) has produced a 15.5% compound average annual total return.
The key to its success has been the company's ability to steadily increase its dividend. It has boosted the payout 115 times since its IPO -- including in each of the last 98 straight quarters -- growing it at a 4.4% annual rate overall. The REIT has steadily increased its payout thanks to rising rental rates and its ability to continue growing its portfolio.
Realty Income sees an enormous opportunity to continue growing in the coming years. The company estimates that there's $4 trillion of owner-operated real estate in the U.S. and another $8 trillion in Europe, giving it a vast acquisition opportunity set. Last year, the company purchased a record $6.4 billion of real estate and acquired fellow REIT VEREIT. It expects to buy at least $5 billion of properties this year. Those and future deals should enable Realty Income to continue growing its 4.4%-yielding dividend in the coming years. That steadily rising income stream should help Realty Income to continue generating attractive total returns.
Great wealth-creating track records
Brookfield Infrastructure, Clearway Energy, and Realty Income have all delivered strong total returns over the years, driven by their ability to grow their dividends. That should continue in the coming years because all three are zeroing in on multi-trillion-dollar opportunity sets. That should give them plenty of fuel to continue growing at above-average rates, which should enable them to produce attractive total returns. A small investment across all three every month could really add up in the decades ahead.
