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Supercharge Your TFSA With This Undervalued 7% High-Yield Dividend Stock

Canada’s TFSA account allows investors to stash their money into a tax-free account where the benefits compound year after year, and, unlike RRSPs, this money will never be taxed.

The current cumulative TFSA allowance is currently $63,500 and the 2019 contribution allowance is $5,500.

Are you looking for a dividend stock that will allow you to make use of the tax-free status of your TFSA?

Cineplex (TSX:CGX) is an undervalued dividend stock that just keeps getting cheaper and cheaper. The stock is down 6% at the time of writing after its earnings release.

Cineplex stock is not without its risks, of course, as the whole movie exhibition industry has been disrupted and is still in the process of settling into the new norm, whatever that will be.

With online streaming services and subscription services such as Netflix, Cineplex has had to contend with a changing customer and a changing competitive profile of its business.

But through all this, Cineplex has responded brilliantly.

From the introduction of premium-priced theatre experiences to a revamping of its in-house food services options and a focus on its Scene loyalty membership, Cineplex has been driving increased revenue per patron as well as increased brand loyalty.

Further, Cineplex has responded by diversifying into other, complementary businesses, where it can leverage its brand and its expertise — businesses such as e-gaming, recreation rooms, and media.


Cineplex is a cash flow business, and the latest quarter shows this fact clearly. Free cash flow increased almost 16%, and free cash flow as a percentage of revenue was a strong 19%.

Revenue per patron increased 3.6% and costs declined nicely.

The dividend was maintained, as it is easily covered by cash flow, and the dividend yield is almost 7%.

“Other” revenue increased 2.8%, with the media segment declining 6.8%, as the company continues to struggle with variability in the advertising market.

Importantly, other revenue now accounts for almost 30% of Cineplex’s total revenue. As this higher-growth segment gears up and as we see increased visibility, we should see the stock strengthen.

In summary

Cineplex stock currently offers investors strong cash flows, a steady anchor in the movie exhibition business, and a fast-growing presence in the lucrative e-gaming world.

Considering the company’s increasing diversification, its strong cash flows and its growing presence in the e-gaming world, this entertainment stock is increasingly well positioned to capture the entertainment needs of the young and old, the millennials and the baby boomers.

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Fool contributor Karen Thomas has no position in any of the stocks mentioned. David Gardner owns shares of Netflix. Tom Gardner owns shares of Netflix. The Motley Fool owns shares of Netflix.

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