A Value Stock With a Stable Dividend and Growth Potential

Here’s another opportunity to buy Intertape Polymer Group (TSX:ITP), but wait for it…

| More on:
The Motley Fool

Here’s another opportunity to buy Intertape Polymer Group (TSX:ITP). Fairly recently, the stock traded at $18 before popping 11% to $20 and then quickly coming back down.

As we near the end of the year, investors might review the stocks in their non-registered accounts that are underwater and sell them at a loss to offset taxes from capital gains. Tax-loss selling activities may go into December, and it may be an opportunity for you to buy depressed stocks at a value.

Intertape Polymer Group is a stock that is subject to tax-loss selling. Most investors who’d bought the stock in the last 12 months are sitting on unrealized losses.

The stock has declined about 20% in the last year. This is because the company lowered its guidance and doesn’t know when the headwinds will subside.

Lowered guidance

In the second quarter, management lowered its guidance for its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) by 6.4% based on the midpoints of the previous and current guidance.

The key reason was that there were “higher raw material costs resulting from a supply interruption and a difficult competitive environment that the company believes is driven mainly by one key competitor in the industry” as quoted from Intertape Polymer Group’s second-quarter press release.

The higher raw material cost should be a temporary issue, but even the management doesn’t know how long it will last. That said, management still estimates the company’s adjusted EBITDA will increase by 10-15% this year.

What does Intertape Polymer Group do?

Intertape Polymer Group operates in the specialty packaging industry. It develops, manufactures, and sells a variety of paper- and film-based pressure-sensitive and water-activated tapes, specialized films, and woven coated fabrics for industrial and retail use.

Dividend and valuation

At $18 per share, Intertape Polymer Group offers a safe yield of nearly 3.8%, and it pays out about 45% of its earnings as dividends. At this price point, it trades at a price-to-earnings multiple of about 14.5.

The Street consensus from Thomson Reuters has a 12-month price target of US$20 on the stock, which implies a target price of CAD$25 based on a more conservative foreign exchange of US$1 to CAD$1.25. In other words, there’s a ~28% discount on the stock.

Investor takeaway

Investors with a long-term investment horizon and who are looking for value and a stable dividend can wait for Intertape Polymer Group’s share price to stabilize near year end before considering a position. The stock can be especially volatile as the company is expected to report its third-quarter results this month.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Kay Ng owns shares of Intertape.

More on Dividend Stocks

edit Business accounting concept, Business man using calculator with computer laptop, budget and loan paper in office.
Dividend Stocks

Value Investors: 2 Canadian Stocks That Are Getting Way Too Cheap

Brookfield Corp. and Algonquin Power & Utilities are great contrarian candidates for value investors seeking a stock rebound.

Read more »

Pixelated acronym REIT made from cubes, mosaic pattern
Dividend Stocks

These Canadian REITs Could Help You Generate Passive Income

These REITs are some of the best to consider if you want passive income on top of solid growth over…

Read more »

stock data
Dividend Stocks

How to Make a $108K Portfolio in 10 Years With $0 in Savings

Dig into your budget and you're sure to come up with cash. Couple that with income streams and investment returns,…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

3 Dividend Stocks to Create $90 in Passive Income Each Month

These valuable dividend stocks are the perfect option for those wanting high dividend yields that won't last forever, locking in…

Read more »

Dividend Stocks

Passive Income: How to Make $480 Per Month Tax-Free

Here's how Canadian REITs could pay you more than $480 per month in TFSA passive income

Read more »

edit Sale sign, value, discount
Dividend Stocks

3 Great Canadian Dividend Stocks Now on Sale

Top TSX dividend stocks are now on sale.

Read more »

Dividend Stocks

2 REITs You Can Safely Buy Even When the Housing Market Does Whatever

REITs are great investments to generate a passive income stream. Here are two options you can safely buy today and…

Read more »

Target. Stand out from the crowd
Dividend Stocks

2 Undervalued Stocks to Invest in This Month

These top Canadian dividend stocks are beginning to look oversold.

Read more »