3 Cheap Dividend Growth Stocks for Your TFSA

CCL Industries Inc (TSX:CCL.B) is one of the three cheap dividend growth stocks suggested.

| More on:
Various Canadian dollars in gray pants pocket

Image source: Getty Images

CCL Industries (TSX:CCL.B), goeasy (TSX:GSY), and Alimentation Couche-Tard (TSX:ATD.B) are some of the strongest dividend growth companies in Canada. All three stocks are trading at a cheap price. By owning those stocks in your Tax-Free Savings Account (TFSA), you’ll profit from their strong growth in share price and dividends tax-free.

goeasy

goeasy provides non-prime leasing and lending services through its easyhome and easyfinancial divisions. It offers a wide variety of financial products and services, including unsecured and secured installment loans, to help Canadians move towards a better financial future as they rebuild their credit and secure first-rate loans.

Customers can transact with easyhome and easyfinancial through an omnichannel model that includes online and mobile, as well as over 400 leasing and lending locations across Canada supported by more than 2,000 employees coast to coast.

The company and its employees give back to the communities in which it operates and has raised more than $2.7 million to support its long-standing partnerships with Boys and Girls Clubs of Canada and Habitat for Humanity.

First-quarter revenue hit a record high of $167 million, up 20% from the same period in 2019, driven by the expansion of the consumer loan portfolio. First-quarter net income was $22 million, up 20% from $18.3 million in 2019, which resulted in diluted earnings per share of $1.41, a 20% increase from $1.18 in the first quarter of 2019.

As well, goeasy has a dividend yield of 6.3%. Its annual dividend growth rate over 5 years is 30.31%. Its payout ratio is only 30%. At 12.4, the current P/E is slightly lower than its five-year average of 12.9.

CCL Industries

CCL Industries is the world’s largest converter of pressure sensitive and specialty extruded film materials for a wide range of decorative, educational, functional, and security applications for government institutions and large global customers in the consumer packaging, healthcare and chemicals, consumer electronics device and automotive markets.

The company employs over 21,000 people and operates more than 180 production facilities in 40 countries with offices in Toronto and Framingham (Massachusetts). CCL is partially integrated in materials science with capacities in polymer extrusion, adhesive development, coating and lamination, surface engineering, and metallurgy, deployed as needed in the four sectors of activity.

Sales for the first quarter of 2020 decreased by 2.7% to $1,296.5 million. Net earnings were $126.6 million compared to $123.6 million in the same quarter a year ago.

CCL has a dividend yield of 1.89%. Its annual dividend growth rate over five years is impressive at 22%. Its payout ratio is quite low at 25%. CCL stock is undervalued with a P/E of 16.2 compared to a five-year average of 24.4.

Couche-Tard

Couche-Tard is the largest independent convenience store operator in Canada. The Laval-based company sells goods intended for immediate consumption, road transportation fuel, and other products mainly in company-operated stores and franchise stores. It operates under the brands Circle K, Ingo, and Couche-Tard.

Couche-Tard exceeded expectations by reporting fourth-quarter earnings of US$576.3 million or $0.52 per share for the period ended April 26, up from US$293.1 million or $0.26 per share a year earlier.

CEO Brian Hannasch said that Couche-Tard gained new customers as stores remained open throughout the pandemic to meet customers’ needs for emergency supplies, impulse purchases, and groceries, which have become increasingly popular, and that it has seen some stickiness.

There has been strong growth in the sale of alcoholic beverages in jurisdictions where these sales are authorized.

The stock has a small dividend yield of 0.8%, but it’s growing fast. Indeed, Couche-Tard five-year dividend growth rate is 22%.

The payout ratio is only 10%, so there is room for further high dividend hikes. Couche-Tard stock is quite cheap with a trailing P/E of 15.2 versus a five-year average of 20.1.

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 Stephanie Bedard-Chateauneuf owns shares of ALIMENTATION COUCHE-TARD INC. The Motley Fool recommends ALIMENTATION COUCHE-TARD INC and CCL INDUSTRIES INC., CL. B, NV.

More on Investing