TFSA Investors: Can goeasy (TSX:GSY) Stock Double Your Money Again in 2020?

Last January, goeasy Ltd (TSX:GSY) stock was my top pick for the month. It has almost doubled and is due for another strong year.

| More on:
question marks written reminders tickets

Image source: Getty Images

Every month, Fool contributors are invited to put forward a top pick for the corresponding month. At this time last year, my top pick for the month of January was goeasy (TSX:GSY).

My investment thesis was simple – the stock was trading at unreasonably low valuations given the selloff that occurred in the fall of 2018.

It turned out that it was great pick! It’s no secret that goeasy has been one of my favourite financial stocks. I have brought it to investors several times, but in 2019 it exceeded even my own lofty expectations.

As of writing, this little-know star has gained 96% year to date. Taking this into account, a $10,000 investment in the company would be worth $19, 600 today. In effect, investors would have almost doubled their money in one short year.

The best part about goeasy is that it remains attractively valued despite hefty gains. The company is trading at only 13.52 times forward earnings with a P/E to growth (PEG) ratio of 0.50.

The PEG ratio is one of my favourite valuation metrics, and was made famous be renowned value investor Peter Lynch. A PEG below 1 is an indication that the company’s stock price is not keeping up with expected growth rates. As such, it is considered undervalued.

This is why goeasy remains an attractive investment option for investors. The company is expected to growth earnings at a 30% clip over the next couple of years.

There aren’t many financial stocks that can lay claim to this type of growth. Is this growth achievable? Given that the company hasn’t missed company guidance since 2011 and it has missed earnings estimates only once in the past few years, it certainly appears to be a safe bet.

Analysts are unanimous in their coverage on the stock – goeasy remains a “buy.”

A top dividend stock

Leaving aside growth and valuation for a moment, goeasy has quietly become one of the best income stocks on the TSX Index. This year, it has officially achieved Dividend Aristocrat status. In March of 2019, it raised dividends by 37% marking the fifth consecutive year of dividend growth.

Given this, goeasy will benefit from additional exposure and liquidity. Funds that track the Aristocrat Index add the company to their portfolios and it gains instant credibility in the eyes of dividend growth investors.

Not only will it prove to be a reliable dividend growth company, but goeasy is doing so at a rate that far eclipses the average.

Over the past few years, Canadian Dividend Aristocrats have averaged approximately 8.50% annual dividend growth. For its part, goeasy has averaged 21% annual dividend growth over the past five years. This is good enough to be ranked among the Top 10 in terms of average dividend growth.

The best part? Considering its expected growth rate and low payout ratio (26%), goeasy is well positioned to maintain over 20% dividend growth.

In fact, 20% may be on the low side considering the dividend growth rate has been on the rise with a 31% three-year average, and as mentioned, its 37% raise last year.

A top pick for 2020?

At this point, there is no reason why goeasy can’t be a top pick in 2020. It’s trading at decent valuations, has one of the highest expected growth rates in the industry and has plenty of room to raise dividends inline with earnings growth.

Simply put, goeasy is a triple threat and as it qualifies as a growth, income and value stock.

 

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.

No tickers found. You need to add tickers and save as draft before fetching disclosure

More on Dividend Stocks

growing plant shoots on stacked coins
Dividend Stocks

Here Are My Top 5 Dividend Aristocrats to Buy Right Now

Now is the time to buy these top five dividend aristocrats at their two-year low before they recover to 2021…

Read more »

edit Real Estate Investment Trust REIT on double exsposure business background.
Dividend Stocks

Is NorthWest REIT Stock the Best High-Yield Dividend for You?

NorthWest REIT (TSX:NWH.UN) offers a substantial dividend, but exercise caution with this riskier stock.

Read more »

STACKED COINS DEPICTING MONEY GROWTH
Dividend Stocks

Income Stocks: A Once-in-a-Decade Chance to Get Rich

These two income stocks are among the best on the TSX for those seeking consistent total returns over a long-term…

Read more »

dividends grow over time
Dividend Stocks

3 Top Royalty Stocks With Dividend Yields of up to 9%

When it comes to secured dividends, these three are top notch. Each offers exposure to royalties through franchising and ultra-high…

Read more »

Golden crown on a red velvet background
Dividend Stocks

This 8 Percent Dividend King Pays Out Every Month

Canoe EIT Income Fund (TSX:EIT.UN) is a staple for monthly income investors.

Read more »

sad concerned deep in thought
Dividend Stocks

Should You Buy Fortis or TC Energy Today?

These stocks have great track records of dividend growth.

Read more »

Dice engraved with the words buy and sell
Dividend Stocks

A&W Stock: Buy, Sell, or Hold?

Shares of A&W (TSX:AW.UN) stock popped by 20% after a major corporate restructuring announcement investors love.

Read more »

Payday ringed on a calendar
Dividend Stocks

3 Monthly Paying Dividend Stocks With Handsome 7% Dividend Yields

Given their healthy cash flows and high yields, I am bullish on these three monthly-paying dividend stocks.

Read more »