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Building generational wealth isn’t a pipe dream. There are several investment vehicles that can help you achieve that, with stocks topping the list. Think about it: You park some money in rock-solid stocks with strong growth catalysts. Over time, these companies exploit opportunities to the hilt and deliver on their growth plans. Their stocks become multi-baggers, and your money turns into lasting wealth that you can pass down to your children, and even grandchildren.
Yes, it’s possible, and there are stocks out there today with the potential to make life-changing wealth in the long term, like the three stocks below. There’s a common link between the three stocks: They’re all riding megatrends, and that’s where lies their growth potential.
Visa (V 0.71%) is a solid bet on the megatrend of digital payments. The world’s largest economies are increasingly bringing the unbanked population into the financial fold, and that has accelerated a shift from cash to cashless payments. In China and India, for example, more than 100 million and 80 million people, respectively, made their first digital payment after the start of the COVID-19 pandemic, according to the World Bank.
Yet, the trend is only just getting started in most parts of the world, which means there are significant growth opportunities ahead of Visa. As one of the world’s largest payment processors, Visa doesn’t lend money but simply facilitates transactions between multiple parties and earns fees in return. So those Visa credit, debit, or prepaid cards that you’ve seen aren’t issued by Visa, but carry the brand name as every transaction made using those cards is processed through Visa. It’s a huge business: Visa processed $10.4 trillion in payments in its fiscal year 2021, which ended Sept. 30.
It’s an asset-light business model that earns hefty margins for Visa, and that’s one of the biggest reasons why the stock has been able to reward shareholders so richly over the years. Visa is flush with cash, is investing in emerging technologies, and pays regular and growing dividends. Factor in the potential for digital payments, and Visa makes a strong contender for a wealth-building stock.
Ford (F -0.33%) looks like one heck of a stock to own for the long term, going by where the company’s focus lies.
Ford’s legacy business is performing well — its F-150 pickup truck continues to be America’s best-selling pickup. Yet, there’ve been some hiccups in its growth of late, compelling the auto giant to change its growth strategy.
Ford is now restructuring its legacy business to convert it into a cash machine that can fund the company’s expansion into the red-hot electric vehicle (EV) space. If you aren’t fully aware yet of the pace of growth in EVs, know that global EV sales doubled in 2021. Yet, EVs still made up only around 10% of global car sales last year.
Ford has been late to the EV party, but it recently started selling an all-electric version of the F-150 pickup called the F-150 Lightning after starting off with two other EVs — the Mustang Mach-E and E-Transit vans. Pre-orders for the F-150 Lightning came so fast and furious that Ford stopped taking more last year after the number hit around 200,000. Ever since, Ford has been working aggressively to expand production capacity to meet demand.
Ford wants to produce 600,000 EVs annually by the end of next year and more than 2 million by 2026. Ford’s EV sales growth is already trouncing the industry, and it expects the trend to continue.
So when you invest in Ford, you can play the EV boom while staying invested in a legacy auto maker. I think it’s a formidable combination, and as Ford unlocks its EV potential, its stock could propel higher and higher to generate multi-bagger returns in the long term.
If I were to single out one energy stock that could build generational wealth, it’s NextEra Energy (NEE 1.41%).
One of the biggest challenges facing the world today is climate change. That has compelled more nations to prioritize climate goals and consider shifting from fossil fuels to clean energy. The International Energy Agency, in fact, projects global renewables capacity to grow by more than 60% by 2026 from 2020 levels. NextEra Energy should be a major beneficiary of this energy megatrend, as it’s hard to match the company’s footprint in the renewables space.
Although NextEra Energy is known as the operator of the largest electric utility in the U.S., Florida Power & Light Company, its clean energy business is also the world’s largest producer of wind and solar energy, and one of the world’s largest battery storage companies.
NextEra Energy has turned out to be an incredible stock so far, having generated hefty returns for shareholders thanks largely to its dividend growth. The company has grown its dividends at a compound annual rate of almost 9.8% since 2006. NextEra is, in fact, a Dividend Aristocrat with more than 25 consecutive years of dividend increases.
NEE data by YCharts
NextEra Energy has massive growth plans. It plans to invest anywhere between $85 billion to $95 billion in growth projects between 2022 and 2025, and it wants to become the most profitable clean energy company in the U.S. in the long run. Its wind and solar portfolio alone could be worth a staggering 50 gigawatts (GW) in capacity at the midpoint of 2025. To put that in perspective, NextEra-owned wind and solar capacity was worth around 21 GW in 2021.
You can sense the kind of growth ahead of NextEra. As the world switches to clean energy, NextEra Energy should grow. And as the company grows, so should its dividends, its stock price, and your wealth.
Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends NextEra Energy and Visa. The Motley Fool has a disclosure policy.
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