The Motley Fool

Canadians: 2 Cheap, but Stellar Dividend-Growth Stocks to Buy Now and Hold for Decades

The TSX Index is still chock-full of bargains, even after its tremendous relief rally sparked by aggressive actions from the U.S. Fed.

As a do-it-yourself stock picker, you can pick your spots carefully and scoop up value even during times when it’d probably be a bad idea to put money in a broader TSX index fund, which some pundits believe is overdue for a correction.

Without further ado, consider the following two attractively valued dividend-growth stocks to help you build substantial wealth through the decades.

TFI International

TFI International (TSX:TFII) is a Canadian transport and logistics company that keeps on trucking. Shares of the less-than-load (LTL), or small-freight, trucker got battered in the crash, losing around half its value from peak to trough. Today, shares of TFII have mostly recovered. However, I think they still look undervalued. This is an economically sensitive play that can offer massive gains in a cyclical upswing.

At the time of writing, TFII stock trades at 2.04 times book and 6.2 times EV/EBITDA, both of which are lower than the stock’s five-year historical average multiples of 2.2, and 8.6, respectively. The dividend, which currently yields just 2.4%, has grown at a high single-digit rate over the years. I expect this trend to continue through the decades, as management continues to make meaningful long-term improvements to its operating efficiency.

TFI has had its fair share of stumbles in the past, thanks to a few self-inflicted operational issues. But over the years, the firm has corrected its mistakes and appears to have learned a great deal. Of late, TFI has been firing on all cylinders and is a terrific way to play to the recovery of the North American economy.

Restaurant Brands International

Restaurant Brands International (TSX:QSR)(NYSE:QSR) stock just reeks of dividend growth. The fast-food kingpin behind such names as Popeye’s, Tim Horton’s, and Burger King has a wide moat and a high-growth business model that’s also capital-light. The intangible value of the power behind QSR’s brands, I believe, has been heavily discounted by folks on the Street over the years.

The pandemic has caused sales to trend sharply lower. A possible second wave of infections could cause just as much damage in quarters to come. For longer-term thinkers, though, the nearer-term headwinds shouldn’t cloud the lucrative long-term growth story. Restaurant Brands has many levers to grow its top-line while making moves to improve upon its return on invested capital (ROIC) through menu innovation. There’s a world of growth potential for Restaurant Brands. With more than enough liquidity (1.98 quick ratio) to survive this coronavirus onslaught, the company will live to see much better days.

In a post-pandemic environment, when ‘inferior goods’ like fast food will be in higher demand, Restaurant Brands will likely be quick to bounce back. The next thing you know, it will find itself gushing with cash again, giving it the option to pursue another acquisition, reward shareholders with whopper-sized dividend increases, finance a beefy share repurchase program, or a combination of the three.

In any case, QSR looks like a wonderful growth business that’s priced more like a stalwart.

If you're looking for opportunities in this uncertain market, I'd encourage you to consider the following

Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

Fool contributor Joey Frenette owns shares of RESTAURANT BRANDS INTERNATIONAL INC. The Motley Fool recommends RESTAURANT BRANDS INTERNATIONAL INC.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.