No, it’s not a pipeline stock. It’s not one of the Big Six Banks. For this dividend king, you’ll have to go to the movies.
Cineplex (TSX:CGX) is a cheap, high-paying dividend stock that’s been like a sleeping giant the last few years. The stock was on a steady increase in the last decade, only to plummet in August of 2017 after the company announced lower profit and lower audience attendance.
But since then, the stock has been slowly but surely creeping back up. Let’s take a look at why this dividend all-star belongs in your portfolio.
The company has also ventured into the arena of entertainment venues, creating The Rec Room, an increasingly popular space where attendees can, of course, see movies, but also enjoy games and live entertainment.
This expansion has seen growth in the company’s bottom line, but it relies mainly on theatre attendance, which the company is quick to point out has been tough across the industry. Even with offerings of seeing professional sports live, Game of Thrones, and even opera in Russia, the company is still struggling.
Analysts are predicting this stock will rise to $40 per share in the next 12 months, despite recent quarterly results that saw theatre attendance fall by 15.6% over the year. The company is confident its second quarter will be stronger, as the beginning of the summer months heat up. Of course, films like Avengers: Endgame will certainly help.
The stock is a long way from where it was at its peak in 2017 with a share price of over $50 per share, now at literally half that price. But that just means the company has a lot of room to grow, as management is making all the right moves to make that happen.
In fact, analysts believe the stock is undervalued, arguing it belongs around $30 per share rather than $25 where it is at the time of writing. The company was well on its way and even surpassed that point back in November, only to plummet again 25%, bottoming out around $23 per share and has since been trying to get back up.
Even during the period of unease, Cineplex has released and raised its dividend consistently over the last few years. Most recently, it was raised by 3.4%. Even better, that dividend is paid out monthly, so investors can look forward to a 6.79% dividend yield over the year, or $1.74 per share per year.
That should be enough to convince investors to buy this stock, which honestly hasn’t been this low since 2011 and likely won’t stay that way for long. As the company continues to expand with its Rec Room, it will rely less on theatre attendance. And with offerings such as the VIP cinemas, the company is constantly coming up with ideas to get people back to the movies.
When it does and that starts showing up as profit, the share price of this company is likely going to explode, meaning you likely won’t just be getting cash from the company’s strong dividend.
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Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned.