Who doesn’t want to get rich? Particularly in today’s economy when prices for even the most basic essentials are more than what most people can afford, being wealthy helps take the edge off the day-to-day drudgery of existing. As the pithy quote says, “I’ve been poor and I’ve been rich. Rich is better!”
Fortunately, investing in the stock market has proved to be the best way to accumulate wealth. Buying stocks to get rich has also never been more accessible.
The democratization of investing over the past few decades has put stocks within the reach of more people than ever before. Buying stocks without any transaction fees means all of the money you put into the market will work for you.
Of course, the question remains: Which stocks should you buy? Indeed, buying penny stocks is an option, but you’re more likely to lose your entire investment than make any money. So, not all stocks are created equal.
I prefer dividend growth stocks. Not only do you own strong, successful companies that share their profits with dividends, but they rapidly grow their payouts over time. You enjoy a rising income stream over time while further building out your gains with capital appreciation.
The goal should be a diversified portfolio of such great investments, and the three stocks to get rich from below are an excellent place to start.
Waste Management (WM)
Garbage collection isn’t what you would call a sexy industry, but it is necessary, and Waste Management (NYSE:WM) is the premiere stock in the space. It collects trash for over 21 million North American customers while operating hundreds of landfills, transfer centers and recycling centers.
Waste Management is the country’s largest garbage collector, generating $20.4 billion in revenue last year and adjusted profits of $2.5 billion. Growth continued in the first quarter, with revenue 5% higher and adjusted operating profits up 22%.
Where the garbage hauler shines is with its dividend. Although it yields a relatively low 1.5% annually, Waste Management has raised the payout at a compound annual growth rate of 7.2% for the past decade. Its dividend is sustainable because it has grown its free cash flow (FCF) at a healthy 4.4% annually over the same period (and at an even healthier 7.2% rate over the last five years).
Waste Management’s FCF payout ratio stands at 62%, slightly elevated but within its historical average, meaning plenty of cash is available for future dividend hikes.
Pool (POOL)
As its name suggests, Pool (NASDAQ:POOL) is a swimming pool supply and equipment company. Although the stock is down 22% year-to-date as economic conditions cause people to refrain from spending on new leisure time activities, there remain significant long-term growth opportunities.
The U.S. population is moving south to warmer climates. The U.S. Census Bureau says southern states saw their populations grow by more than 1.3 million people in 2022, up 1.1% from the prior year, making it the fastest-growing region in the country. That means more homes are being built there. Over 5 million new single-family homes were built in the U.S. between 2020 and mid-2023, most of them in southern and western states.
Although a tough economy causes fewer people to splurge, it also means they will staycation at their homes more often. Adding a swimming pool adds value and leisure time activity. It’s why Pool has seen sustained growth in sales and profits for the past decade.
The pool also rewards its shareholders with a rapidly rising dividend. The payout yields 1.6% annually but has increased at a 19% CAGR for the last 10 years. At the same time, FCF has grown 25% annually. With a very low 20% FCF payout ratio, Pool offers investors tremendous dividend growth opportunities.
Microsoft (MSFT)
Tech giant Microsoft (NASDAQ:MSFT) is the third stock to get rich from. Its fiscal third-quarter performance was particularly impressive as revenue grew 17% while net income surged 20% year-over-year. The advent of artificial intelligence supercharged Microsoft’s business, turning this massive tech company into a growth stock once again.
That’s no small feat for the most valuable stock on the market, worth $3.38 trillion. With AI suffused throughout all its products and services, Microsoft has a new lease on life. Particularly in its Azure cloud services business, where sector revenue jumped 20% from last year, the tech leader is attracting more and bigger companies to its platform. Almost half of all Fortune 500 companies use Azure AI models, and Microsoft now has 53,000 Azure AI customers.
Though tech stocks aren’t typically known for their dividend payments, Microsoft readily breaks the mold. Sure, the starting yield is a paltry 0.7%, but Microsoft has raised the dividend at a 10-year CAGR of 10%. Free cash flow has grown at nearly a similar rate, keeping the payout ratio at an easily manageable 33%. It also has a 22-year history of raising dividends, making Microsoft stock one to buy now if you want to get rich.
On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
