I’m sure most people reading this would like to retire rich.
It takes years and years for most people to earn and save enough money to be as rich as they’d like to be.
But I don’t think Australian index-like investments produce enough growth for investors to reach retirement at a good pace. Many large ASX businesses aren’t generating much growth, they aren’t re-investing for growth and produce relatively low returns on equity (ROE).
Here are three shares that I think could help you retire rich:
Webjet Limited (ASX: WEB)
Webjet is a leading online travel business for consumers and businesses alike. Its share price has grown by 293% over the past five years despite the recent Thomas Cook problems.
The company has grown so much already but I think there’s a lot more to come over the long-term with an increasing focus on its WebBeds business which management think can hit an earnings before interest, tax, depreciation and amortisation (EBITDA) margin of 50%. Excluding Thomas Cook, this segment grew total transaction value (TTV) by 50% in the first few months of FY20.
I believe Webjet is so attractive for long-term wealth because it’s growing a variety of different business all of which can achieve high profit margins which should see profit (and the dividend) continue to grow at a good pace.
It’s trading at 14x FY21’s estimated earnings.
WAM Microcap Limited (ASX: WMI)
Some of the best and most attractive opportunities on the ASX are in the small cap space. The WAM Microcap team look for opportunities that have a market capitalisation of under $300 million, they are doing the investing for us.
Not many investors look at small caps, so if one does their homework you can find some real gems at good prices that are on their way to become the next blue chips.
Since inception in June 2017, the WAM Microcap portfolio has returned an average of 23.7% per annum before fees, expenses and tax. It has been one of the best-performing listed investment companies (LICs) over the past year.
There will be some painful years but it has shown it can achieve strong returns and grow the dividend.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
Soul Patts is perhaps one of the best businesses on the ASX. It has been listed for over a century and has paid a dividend every year in that time. Once you become rich you want to stay rich with regular cashflow in the form of attractive dividends and capital growth.
The investment conglomerate has increased its dividend every year since 2000, which is a great streak.
Soul Patts has achieved a compound annual growth rate of 16.1% over 40 years to July 2019, which would have turned $1,000 into $395,788 with dividends re-invested. Returns haven’t quite been as strong over the past 15 years with total shareholder returns of 11.6% per annum, which is still good and beat the market.
The company has a diverse, uncorrelated portfolio which should prove very useful if the market goes down. It’s investing in long-term opportunities like retirement villages and financial services which are exposed to the long-term tailwinds of the ageing population and the growth of super.
I think all three companies are well positioned to continue to deliver good returns. Soul Patts is wonderfully defensive with a great growing dividend, WAM Microcap’s total returns are very strong over the long-term and Webjet looks excellent value to me for the next three to five years.
These top ASX shares are also great candidates to help you retire rich for the long-term.
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Motley Fool contributor Tristan Harrison owns shares of WAM MICRO FPO and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Webjet Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.