Did you know that the top 25% dividend-paying stocks on the TSX index pay around 6.52%? If you happen to be a passive-income investor, you will know that few healthy stocks exceed this region. Now and then a +7% or a +8% yield will generate a few headlines here and there, but for the most part, a Canadian investor generally expects yields of below 6%.
That’s not so for the stock detailed below. It has been offering a high dividend yield for some time; the following ticker is currently listed with a +15% yield. However, chasing high yields can be a dangerous game to play, so let’s go through the rest of the data to see if this stock is a buy.
Gluskin Sheff + Associates (TSX:GS)
Not so long ago, some pundits were eyeing this stock as a +9% yield-paying anomaly; however, as that share price has continued on its downhill trajectory, that dividend yield has climbed accordingly to even greater heights. But is this stock a buy? With that yield forecast to dip back to the 9% region next year, what other data should would-be investors be looking at to corroborate a buy signal for this stock?
A one-year past earnings growth of 4.6% underperformed by a wide margin the Canadian capital markets for the same period of time (up 30.6%), with a five-year average past earnings shrinkage by 20.7%. To complete this snapshot before we delve into the rest of the data, a PEG of 0.5 times growth does seem to represent good value, while some inside buying during the last 12 months dovetails with a lack of debt.
5 TSX Stocks Under $5Click here to learn more!
How does this stock score on value, quality, and momentum?
A brief scan of three main factors can give a rudimentary buy, hold, or sell signal for any given stock: these are value, quality, and momentum. To take the first factor, Gluskin Sheff + Associates has a low P/E of eight times, which should corroborate that decent PEG we just saw. However, a P/B of 3.4 times tells a different story, indicating poor valuation in terms of assets.
In terms of quality, this stock shapes up quite nicely: a significantly high past year ROE of 43% pairs with a welcome 17% expected annual growth in earnings, while last quarter’s EPS of $1.31 is positive at least and helps to round out an overall healthy stock.
Meanwhile, on the momentum front, Gluskin Sheff + Associates shows a few signs that it’s a more turbulent stock than expected: up 2.26% in the last five days, this TSX index dividend heavyweight is discounted by 33% compared to its future cash flow value and has a beta of 1.9, indicating high volatility relative to its industry.
The bottom line
Now that we’ve combed through the data for this high-yield dividend stock, it’s time to look at that percentage itself. A yield of 15.36% is one of the highest on the TSX index, and with at least some indication of good value in a few regards and some growth ahead, investors may wish to look past recent underperformance to take a chance on some potentially sizable passive income.
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 Victoria Hetherington has no position in any of the stocks mentioned.